STOCKS
Dow and DAX are heading higher to test their crucial resistances. 30800-31000 on the Dow and 13800-13900 on the DAX are important levels to watch and we expect the indices to reverse lower from there. Nikkei continues to remain stuck in the 26500-27000 range. Shanghai is indicating the chances of a rise towards the upper end of its 3180-3450 range contrary to our expectation to fall within the range. Sensex and Nifty retain their momentum and can move up further. The correction in Sensex and Nifty may now happen as the Dow starts to correct after testing 31000.
Dow (30303.37, +148.83, +0.49%) has moved up and a strong close above 30350 will open doors to test 30800-31000 next week. However, we reiterate that 30800-31000 is a strong resistance zone that can cap the upside and trigger a sharp corrective fall to 28000 and even lower.
DAX (13667.25, +101.27, +0.75%) has surged further and is heading up to test 13800-13900 in line with our expectation. But a further rise past 13900 could be difficult. We retain our view of seeing a sharp corrective fall to 13200-13000 initially and then even to 12400 eventually in the coming weeks.
Nikkei (26749.78, −56.89, -0.21%) is not going anywhere and is just stuck inside the 26500-27000 range. We retain our view. 27500 can be a cap on the upside in case of a break above 27000. We will be looking for a corrective fall from 27500 towards 25500-24500 eventually.
Shanghai (3404.70, −0.17, 0.005%) is attempting to break above 3400 contrary to our expectation to reverse lower from there. A sustained break above 3400 can take Shanghai up to 3450 again. It will also delay the fall to 3300-3250 that we had been mentioning over the last few days. Overall, the 3180-3450 range is intact.
Nifty (13740.70, +58, +0.42%) and Sensex (46890.34, +223.88, +0.48%) retains their strength and had moved up to test 13750 and 47000 respectively. A strong rise past 13750 on the Nifty and 47000 on the Sensex can take the indices further higher. As mentioned yesterday, the expected correction is not happening in these indices and we will now prefer to step-back and just watch to see from where they can reverse lower. If the correction in the Dow happens from 31000 in line with our expectation then the Sensex and Nifty can also follow from their corresponding levels at that time.
COMMODITIES
Strong rally seen in the commodities sector. Crude prices have been moving higher slowly while Gold, Silver and Copper has been rallying at a faster pace. All the three metals look bullish for a rise towards 1900-1920, 27-28 and 3.65-3.70 levels respectively for the near term.
Brent (51.35) and Nymex WTI (48.47) are stable near higher levels seen yesterday. We continue to be bullish on crude prices towards $52-53 and $48-50 for Brent and WTI respectively.
Gold (1885.80) has moved up significantly and could soon be headed towards 1900-1920 on the upside before a corrective decline is seen again in the longer run. Immediate view is bullish.
Silver (26.08) has successfully moved above our expected initial hurdle of 26 and could now have scope for a further rise to 27-28 in the medium term before any decline is seen again. Immediate view is bullish on Silver.
Copper (3.6305) has almost moved up to test our expected 3.65 and if that breaks it may extend to 3.70 in the near term. View is strongly bullish for the near term.
FOREX
Dollar Index trades lower but needs to break below the crucial support at 89.96 to fall further. Euro could test 1.23-1.2350 on the upside before a sharp decline is seen. USDJPY could trade within 103-104 region for now but we cannot negate a possible fall to 102. USDCNY may trade within 6.52-6.56. Aussie and Pound have dipped a bit but broadly looks ranged for now. USDINR has bounce back well. It needs to sustain below 73.45 in order to remain low and head towards 73.0-72.90.
Dollar Index (89.978) has broken below crucial support near 90-89.96 and if the fall sustains, the index could be headed towards 89 on the downside soon before again bouncing back to higher levels.
Euro (1.2247) has dipped slightly from 1.2272 but if the dollar Index breaks below crucial support near 89.96, we may expect another rally in Euro towards 1.23. As mentioned yesterday there is scope for a test of 1.3200-1.2350 on the upside before a corrective fall is seen in the longer run.
EURJPY (126.63) trades higher and could test 126.79 on the upside. A break above that if seen could take it further up towards 127. View is bullish for the near term.
Dollar-Yen (103.41) has bounced well from 102.87 seen yesterday. A fall in the near term towards 102 cannot be negated. A range of 104-102 may hold for the medium term.
Aussie (0.7598) fell from levels near 0.7638 yesterday despite the rally seen in commodities. The sharp rise expected in Copper (refer to commodities section above), if seen could be bullish for Aussie also in the near term taking it higher towards 0.77 on the upside.
Pound (1.3534) has dipped sharply but we may expect trade within 1.36-1.3450 in the near term.
USDCNY (6.5398) has bounced well as 6.52 seems ti be holding well for now. Trade within the broad 6.52-6.56 looks possible in the near term.
USDINR (73.6025) bounced back from 73.39 yesterday. If the break below 73.45 does not sustain, it would be difficult for the pair to move lower and instead could bounce back to 73.60/70 again today.
INTEREST RATES
The US Treasury yields remain stable and keep alive the chances of revisiting their crucial long-term resistances again in the near-term which we expect to hold. However, the price action in the coming days will need a close watch to see if the yields can break these resistances or not. The German yields sustain higher and can move up in the near-term. The 10Yr GoI can rise within its 5.90%-5.98% range. We expect this range to remain intact for some time.
The US 2Yr (0.12%), 5Yr (0.37%), 10Yr (0.92%) and the 30Yr (1.67%) remains stable. The chances of a retest of the crucial resistance levels of 1% (10Yr) and 1.75% (30Yr) in the near-term are still there. It will have to be seen if the yields can breach these levels and indicate a long-term trend reversal. We will have to watch closely the price action in the coming days.
German 2Yr (-0.74%), 5Yr (-0.75%), 10Yr (-0.57%) and the 30Yr (-0.16%) yields remain stable. Our view remains the same. While above -0.60% (10Yr) and -0.20% (30Yr) the yields can move up to -0.50% (10Yr) and -0.10% (30Yr). It will also reduce the danger of seeing the fall to -0.70% (10Yr) and -0.40% (30Yr) that we had been expecting earlier.
The 10Yr GoI (5.9524%)sustains well above 5.94% and keeps intact our view of seeing 5.97%-5.98% on the upside. We expect the 10Yr GoI to reverse lower from the 5.97%-5.98% resistance region and keep the 5.90%-5.98% range intact for some more time.
