STOCKS
DAX, Sensex and Nifty have bounced-back yesterday after witnessing a sharp fall on Monday. But it will have to be seen if they can get a strong follow-through rise in the coming days. But that might be difficult as the spread of the new variant corona virus might weigh high on the market sentiment. Also, the Dow is showing signs of weakness and looks vulnerable for a fall from here itself. A break below 29500 on the Dow can trigger the much awaited corrective fall to 28000 which in turn can drag the other indices also. Nikkei has also declined below 26500 and is under pressure to fall from here itself. Shanghai can fall within its 3180-3450 range. Overall the sentiment is weak and the corrective fall that we have been expecting for a long time in equities is likely to happen in some time now.
Dow (30015.51, −200.94, -0.67%) seems to have failed to get a strong follow-through rise after Monday’s strong bounce-back from the low of 29755.53. The price action in the coming days will need a close watch. As mentioned yesterday, a strong close below 29500 from here will trigger the much awaited corrective fall to 28000 and even lower levels. It will also negate the chances of seeing 30800-31000 on the upside.
DAX (13418.11, +171.81, +1.30%) has recovered well but will need to breach 13500 in order to bring back the bullishness which could be difficult at the moment. As such we see high chances of DAX to trade below 13500 and remain under pressure to break 13000. Such a break will trigger the expected corrective fall to 12400 going forward.
Nikkei (26463.32, +26.93, +0.10%) has declined below 26500 and is showing signs of weakness. A sustained fall from here will negate the chances of seeing 27500 on the upside. In turn that will trigger the long awaited corrective fall to 25500-24500 that we have been expecting.
Shanghai (3381.23, +24.44, +0.73%) fell sharply below 3400 contrary to our expectation to see a rise to 3450 again. A further break below 3350 can drag it to 3300-3250 in the coming days. Overall the 3180-3450 range is intact and Shanghai can fall within this range towards the lower end of this range.
Nifty (13466.30, +137.90, +1.03%) has recovered but needs to see if it can get a follow-through rise. We expect it to face resistance at 13600 and remain under pressure to test 13000-12800 on the downside.
Sensex (46006.69, +452.73, +0.99%) on the other hand will have to rise past the 46350-46500 resistance zone to regain strength. While below 46500 the chances are high for it to fall towards 44000-43500 in the coming weeks.
COMMODITIES
The new variant of Covid-19 found in the UK is now the headlines that are dragging down metals and other commodities. If this is an indication of a possible second wave of the pandemic, it could cause more panic and result in near term sell off in the overall global markets.
Watch price action near supports at 1860 and 25 on Gold and Silver respectively. Failure to hold and bounce from support levels could be bearish for the near term. We wait and watch price action over the next two days. Copper could be headed towards support at 3.45 from where a bounce looks possible. Crud prices trade lower for now and could remain low for the next few sessions.
Brent (49.40) and Nymex WTI (46.36) have dipped and have not been able to rise past our earlier mentioned resistances near $52-53 on Brent and $48-50 on WTI. While these levels hold as immediate resistances, we may expect a dip in crude prices for the near term.
Gold (1867) and Silver (25.27) have both fallen and now trade just above the important near term supports at 1860 and 25 respectively. While the mentioned supports hold, we may expect a bounce back in prices in the near term. Failure to hold and bounce from respective supports could drag them lower towards 1840-1820 and 24 respectively.
Copper (3.4910) has fallen below 3.50 and could test support near 3.45 now before bouncing back from there again.
FOREX
Dollar Index has strengthened a bit dragging down Euro to test support at 1.2150. While above support Euro may head higher towards 1.22 again but a failure to bounce back immediately could make it more vulnerable to a sharper fall in the near term. Aussie and Pound are trying to recover from recent lows and could move up a bit. EURJPY is ranged. USDJPY may bounce higher for now but overall could be ranged within 104-103. USDINR needs to sustain above 73.45 to move up again towards 74 or higher. Failure to sustain above 73.75 ccan drag it down to 73.45 again in the near term. We would like to wait and watch price action near 73.75.
Dollar Index (90.522) did test 91 on the upside a few sessions ago but has dipped back from there. A rise above 91 could make the index stronger and to rise further towards 92 on the upside. For now while we look for a ranged trade within 90-91, a break above 91 cannot be negated.
Euro (1.2175) has support at 1.2150 which has been tested exactly as mentioned yesterday. While the support holds, a bounce back in Euro is expected in the near term back towards 1.22 or higher. Watch price action near current levels for further clarity. A break below 1.2150 could make Euro vulnerable to a sharper fall.
EURJPY (126.01) has fallen sharply and a break below 126 if sustains could drag it lower to 125.50-125.10 in the near term.
Dollar-Yen (103.52) may trade within 104-103 region for the near term with a maximum possible upside at 104.50 for now. While below 104, we may expect another dip towards 103.
Aussie (0.7543) has bounced a bit from 0.7450 and could trade within the broad 0.7450-0.7650 region for the near term. A bounce towards the upper limit looks possible within the mentioned range.
Pound (1.3388) is trying to bounce from 1.3280 and needs to sustain to gradually take the exchange rate higher towards 1.35-1.36. The news about a new variant of Covid-19 is concerning and as we suspect a possible second wave of the pandemic in the UK, we may expect some volatility in Pound in the near term.
USDCNY (6.5528) has been trading within a narrow range and a sustained break above 6.56 is needed to become bullish for the near term. While below 6.56, we may expect 6.56-6.52 region to hold while the pair may trade near the upper end of the range.
USDINR (73.8450) traded below 74 yesterday and fell during the day but we keep a close watch at immediate support at 73.75 which may hold in the near term to produce a bounce back towards 74 or higher. We would wait to watch if 73.75 holds or gives way over the next few sessions. On the upside there is room for a rise to 74.25/50 over the medium term but at the same time we cannot negate a possible fall to 73.45.
INTEREST RATES
The US Treasury yields have dipped across tenors but have near-term supports coming up. While these supports hold, the yields can rise in the near-term to test their long-term resistances again and then fall-back. The German yields have dipped and seems can resume the broader downtrend without seeing a rise to test its intermediate resistance that we had been expecting. We will have to wait and watch the price action in the coming days. The 10Yr GoI retains its 5.90%-5.98% range and can fall within the range in the coming days.
The US 2Yr (0.11%), 5Yr (0.36%), 10Yr (0.91%) and the 30Yr (1.64%) have dipped yesterday. 0.85% on the 10Yr and 1.60% on the 30Yr are key immediate supports. While above these supports, our view of seeing a rise to 1% (10Yr) and 1.75% (30Yr) will remain intact. Thereafter we expect the yields to reverse lower and keep the long-term downtrend intact.
German 2Yr (-0.75%), 5Yr (-0.77%), 10Yr (-0.60%) and the 30Yr (-0.21%) yields have reversed lower across tenors and seem to lose strength. A further fall from here will negate the chances of seeing -0.50% (10Yr) and -0.10% (30Yr) that we had been expecting. It will also bring back the bearish outlook of seeing -0.70% (10Yr) and -0.40% (30Yr) into the picture again.
The 10Yr GoI (5.9513%) remains lower and is inching down slowly. We retain our view of seeing a fall to 5.92%-5.90% in the near-term. Overall the 5.90%-5.98% range is likely to remain intact for some more time.
