STOCKS
Sharp fall in the Dow on the first trading day of the New Year. A strong follow-through fall below 30000 today will reduce the chances of seeing 31000 on the upside and could trigger the much expected corrective fall from here itself. DAX continues to face resistance at 13900 and can see a sharp fall on a break below 13600. Nikkei is turning down from 27500 as expected. Shanghai has room to test 3550-3600 before a corrective fall while it sustains above 3450. Sensex and Nifty remain strong but might see a dip on the back of the overnight sell-off in US equities.
Dow (30223.89, −382.59, -1.25%) fell sharply but had managed to bounce-back well from the low of 29881.82. A strong break/close below 30000 today will reduce the chances of seeing 31000 on the upside and in turn can trigger the fall to 29500-29000 from here itself.
The resistance at 13900 on the DAX (13726.74, +7.96, 0.06%) continues to hold well. This keeps our view of 13900-14000 being a cap on the upside and seeing a sharp corrective fall to 13200 and 12400 going forward. A break below 13600 can trigger this fall. The chances of seeing an extended rise to 14500 mentioned yesterday stands reduced.
Nikkei (27232.38, −26, -0.09%) is turning down as expected from 27500 itself. A strong break below 27000 from here will negate the chances of seeing the extended rise to 28000 mentioned yesterday. That in turn can trigger the expected corrective fall to 26000-25500 initially and then to 25000-24000 eventually.
Shanghai (3493.25, −9.71, +0.28%) sustains higher and hovers around 3500. While above 3450, the outlook is bullish to see a rise to 3550-3600 after which a corrective fall to 3470-3450 is possible.
Nifty (14132.90, +114.40, +0.82%) and Sensex (48176.80, +307.82, +0.64%) have risen further yesterday as expected but might see a pull-back following the sell-off in the US equities over night. Nifty will have to fall decisively below 14000 and the Sensex below 47000 in order to come under pressure and reduce the chances of seeing any further rise. We will have to wait and watch the movement today.
COMMODITIES
Crude prices may be ranged below immediate resistances of $53 (Brent) and $48-49 (WTI) while the yellow metal (Gold) is steadily moving up to soon target 1980. Silver is also rising but in a slower pace and could head towards 28.0-29.50 in the medium term. Copper needs to sustain above current levels to rise back to 3.65/70 else we may not rule out a possible fall towards 3.50-3.40/35 before a sharp rise is seen again. Overall commodities look bullish for the near to medium term.
Brent (51.16) and Nymex WTI (47.72) have dipped holding below immediate resistances of 53 and 48-49 respectively. Continuous re-testing of the resistances may lead to an eventual breakout on the upside taking the crude prices higher towards $55 and $50-51 respectively in the medium term. While below immediate resistances, we may expect some ranged movement for now.
Gold (1941.50) has been rising steadily and tested the initial levels of the 1940-1980 range mentioned yesterday. While the price holds above 1940, it could extend towards 1980 soon. Immediate view is bullish on the yellow metal.
Silver (27.33) has also inched up and looks further bullish for a possible test of 28 on the upside. On the medium charts there is scope for a test of 28.0-29.50 before a sharp corrective dip could be seen.
Copper (3.5880) has moved up a bit and needs to sustain well above 3.50 in order to re-test 3.65/70 on the upside else we may not rule out possibility of a fall to 3.40/35 on a break below 3.50 before any sharp reversal sets in. Watch for price action near current levels.
FOREX
Most currencies look strong despite slight corrective dips and has further room on the upside. USDCNY and USDINR can test 6.40/38 and 72.80/75 before a reversal is seen while Dollar Yen has bounced well from 103.70 and could test 103.50 before again falling back to lower levels. EURJPY and Euro look strong just now and could move up towards 127.27 and 1.2350 respectively in the near term. Aussie and Pound may rise back after the immediate corrective dip while we keep our upside targets of 0.78 and 1.38 intact.
Dollar Index (89.75) looks bearish for a fall towards 89 or even 88 in the longer run while below 91-90.
Euro (1.2268) may rise towards 1.23-1.2350 which needs to break on the upside to head higher towards 1.25 in the longer run. For now while above 1.2150, view is bullish for a possible test of 1.2350.
EURJPY (126.51) has risen as expected and could continue to move up towards 126.80-127.27 in the near term. Immediate view is bullish.
Dollar-Yen (103.13) has managed to rise from levels near 102.71 seen yesterday and could possibly test 103.50-103.75 on the upside before again falling back towards sub 103 levels within the next couple of weeks. Immediate view is bullish while above 103, within an overall downtrend.
Aussie (0.7697) has dipped a bit but overall the currency looks bullish towards 0.78 in the near term. Immediate view is bullish.
Pound (1.3586) has dipped but immediate downside could be limited to 1.34 and a bounce back towards 1.38 could be expected over the medium term.
USDCNY (6.4394) continues to fall at a faster pace than expected and could come down to test 6.40/38 in the near term. Immediate view is bearish till a significant reversal signal is seen.
USDINR (73.0250) tested 72.90 yesterday but could not sustain below 73 as it bounced back to close higher at 73.0250. While we still keep our view bearish towards 72.80/75 to be seen in the near term, any bounce from current levels may not rule out a test of 73.20/25 on the upside.
INTEREST RATES
The US Treasury yields have dipped slightly within their near-term range. It will have to be seen if the yields break their range on the downside in case if the sell-off in equities deepens further going forward. The German yields have turned down indicating the end of their corrective bounce. This keeps the broader bearish view intact and a fresh fall is possible now. The 10Yr GoI has declined below a key support and the deeper fall that we had expected can now happen straight away without seeing any corrective bounce.
The US 2Yr (0.12%), 5Yr (0.35%), 10Yr (0.92%) and the 30Yr (1.66%)Treasury yields have come-off slightly across tenors. As mentioned yesterday, the 10Yr and 30Yr are stuck in a range of 0.90%-0.95% and 1.64%-1.70% respectively. A breakout of this range will determine the next move. From a bigger picture, 0.80% (10Yr) and 1.60% (30Yr) are important supports which will have to be broken in order to turn the outlook negative. We will have to wait and watch.
The German 2Yr (-0.73%), 5Yr (-0.77%), 10Yr (-0.61%) and the 30Yr (-0.20%) yields are turning down. The chances of testing -0.50% (10Yr) and -0.10% (30Yr) is getting reduced. Instead the broader down trend can resume from here itself. As such our view of seeing -0.70%/-0.80% (10Yr) and -0.30%/-0.40% (30Yr) remains intact and can happen without seeing an extended corrective rise.
The 10Yr GoI (5.8610%)has declined breaking below 5.88% without seeing a corrective bounce to 5.92%-5.94%. The fall to 5.82%-5.80% can now happen straight away.
