STOCKS
Equities continue to trade strong. Though they have room to move up further in the coming days, we see the upside limited from current levels. 31300-31500 on the Dow, 14500 on the DAX, 3600 on Shanghai are crucial levels to watch now. While these resistances hold, the long awaited correction in equities can happen going forward. Sensex and Nifty retain their strength. Being in the uncharted territory, a correction on the other global equities will be an indication to see a reversal in Sensex and Nifty. Nikkei is closed today. It has key resistance ahead at 28300.
Dow (31097.97, +56.84, +0.18%) sustains higher and keeps alive the chances of seeing an extended rise to 31500-31500. However, we expect the upside to be limited from here and a sharp correction is possible anywhere from the 31000-31500 region. As such we would remain very cautious rather than becoming more bullish at current levels.
As expected, DAX (14049.53, +81.29, +0.58%) has broken above 14000 and keeps intact our view of seeing an extended rise to 14500. Thereafter the index can see a corrective fall to 14000 initially and further lower eventually. Our view of seeing this correction from 14000 itself has not worked out well.
Nikkei (28139.03) is closed today on account of a public holiday.
Shanghai (3580.85, +10.74, +0.30%) has tested 3600 as expected. 3597.70 is the high made on early trades today. As we had mentioned last week, the price action at 3600 will need a close watch as a strong reversal from there can drag the index lower to 3450-3400. On the other hand, a strong and decisive break above 3600 (less likely to be seen immediately) will be very bullish from a long-term perspective.
Nifty (14347.25, +209.90, +1.48%) and Sensex (48782.51, +689.19, +1.43%) continues to surge. Nifty has risen above 14300 and can move further up towards 14500. Sensex has risen above 48700 and can test 49000 in the near-term. A strong break above 49000 will pave way for further rise. As mentioned last week, unless we get an indication from the Dow for any sharp correction, Sensex and Nifty are likely to continue their surge.
COMMODITIES
Except Crude prices the other metals trade sharply lower possibly indicating the bears taking control now. With a possible pause or corrective upmove in the very near term the metals could fall some more over the next couple of weeks before a reversal looks possible. Copper may test 3.50 while Silver needs to bounce back from 24.0-24.50 to move up from here. Gold has immediate support at 1820 which may hold just now but over the next couple of weeks, we may expect lower levels of 1780-1740. Crude prices may continue to move up.
Brent (55.50) and Nymex WTI (51.98) have risen well testing highs of 56.39 and 52.70 respectively before dipping off a bit from there. Overall near to medium term looks bullish for a further rise towards 60 (Brent) which is an important resistance and could produce a sharp rejection. WTI if sustains a rise above 52 could be headed towards 55, the next resistance on the upside.
Gold (1833.00) has fallen sharply over the last couple of sessions indicating strong bears are in place that could drag the price lower towards 1780-1740 in the medium term. Watch for a possible pause or corrective bounce from 1820 (immediate support) to be followed by a deeper decline.
Silver (24.78) has crashed breaking below 27 contrary to our expectation. Immediate support is seen near 24.50-24.00 region which needs to hold to push the prices back to higher levels just now. Failure to hold above 24 would open up chances of a fall to 22 eventually.
Copper (3.6460) faced stiff rejection from 3.73/75 region and if the fall sustains it could extend to 3.50 before again bouncing back from there. Immediate view is to see some stability or a fall while below 3.75
FOREX
Strong Dollar continues to keep other currencies under pressure as most of them trade low and may continue to remain bearish for some sessions. Aussie and Pound may test 0.7640-0.7600 and 1.34 respectively while Euro may test 1.2150-1.20. EURJPY could fall back to 126 while Dollar Yen may test 104.50. USDINR and USDCNY not remaining an exception could rise towards 6.50 and 73.50/75 respectively.
Dollar Index (90.37) has risen well as expected and could be headed towards 91-91.50 in the near term before a possible rejection is seen. Immediate view is bullish.
Euro (1.2175) has fallen well and has scope for a fall to 1.2150-1.2000 in the next few sessions before a bounce looks likely. Immediate view is bearish. Look for a short pause near 1.2150.
EURJPY (126.80) has dipped too and could fall to 126 before attempting to move up again. While 127.50 holds well, the pair is bearish.
Dollar-Yen (104.12) is moving towards 104.50 on the upside from where a dip looks likely. Failure to stop at 104.50 could open up chances of 105 or higher in the longer run. Watch price action near 104.50 closely.
Aussie (0.7709) has fallen sharply and could test 0.7640-0.7600 in the near term before bouncing from there. Near term looks bearish.
Pound (1.3514) has fallen too and looks bearish towards 1.34.
USDCNY (6.4848) has risen and could test 6.50. Immediate view is bullish.
USDINR (73.2450) rose to test 73.4550 before falling back to close near 73.2450 on Friday. With the current weakness in most currencies globally, USDINR may not be an exception and could head towards 73.50/75 before pausing there.
INTEREST RATES
The US Treasury yields have surged last week on the back of the strength in equities. The outlook is bullish and the yields have to move up further in the coming days to test their next crucial resistances. The German yields have key resistances ahead which we expect to hold and drag the yields lower again. A strong break above the immediate resistances will negate our bearish view. The 10Yr GoI looks mixed in the near-term and can oscillate in a sideways range for some time.
The US 2Yr (0.13%), 5Yr (0.48%), 10Yr (1.12%) and the 30Yr (1.87%)Treasury yields have surged especially at the far-end sharply last week. We retain our bullish view of seeing 1.20%-1.25% (10Yr) and 1.90%-1.95% (30Yr) on the upside in the coming weeks. As mentioned on Friday, we prefer to watch the price action in the 1.20%-1.25% (10Yr) and 1.90%-1.95% (30Yr) closely and cautiously for a possible reversal.
The German 2Yr (-0.71%) and 5Yr (-0.73%) yields were flat while the 10Yr (-0.52%) and the 30Yr (-0.13%) have also risen last week. Immediate resistances are at -0.50% (10Yr) and -0.10% (30Yr) which we expect to hold and trigger a fall-back to -0.60% (10Yr) and -0.20% (30Yr) again. As mentioned on Friday, only a sustained break above -0.50% (10Yr) and -0.10% (30Yr) will negate this bearish view.
The 10Yr GoI (5.8945%) looks mixed in the near-term. It has equal chances to either go up to 5.92%-5.94%%-or fall to 5.86%-5.85% from current levels. We expect the yield to oscillate in the range of 5.86%-5.92% (narrow) or 5.84%-5.94%/5.98 (broad) in the near-term.
