STOCKS
Equities continue to hover at their highs and remain mixed. Biden has announced a $1.9 trillion stimulus plan which can support the equities to stay higher. However, it will have to be seen as how much of this is already priced in the market. Dow is struggling to get a strong follow-through rise above 31000 while the DAX is bouncing from its near-term support and keeps alive the chances of seeing one more leg of rise. Nikkei, Sensex and Nifty oscillate at their highs and do not show any immediate sign of reversal. Shanghai trades below its crucial resistance and can fall in the near-term. Overall we retain our cautious stance in equities although there is room for rise. A correction is due for a long time. We will have to wait and see what could be the trigger for that.
Dow (30991.52, −68.95, -0.22%) made a high of 31223.78 and has come off from there. The index seems to lack strong follow-through buying to sustain above 31000. We retain our cautious view. We expect the upside to be capped at 31300-31500 and a sharp corrective fall to 29500-29000 is likely to be seen in the coming weeks.
As expected, DAX (13988.70, +48.99, +0.35%) is bouncing back and keeps alive the chances of seeing the extended rise to 14500 mentioned yesterday. Thereafter the index can reverse lower and see a corrective fall to 14000-13800 initially and further deeper eventually.
Nikkei (28639.05, −59.21, -0.21%) has come-off from yesterday’s high of 28979.53. The index has to fall below 28000 in order to signal a top in place and indicate a reversal. Until then the chances of seeing 29600 on the upside that was mentioned yesterday cannot be ruled out.
Shanghai (3573.65, +7.75, +0.22%) remains below 3600. As mentioned yesterday, while below 3600, 3525 can be seen again. A strong break below 3525 can drag it to 3450 and even 3420-3400 in the coming weeks. A strong break/close above 3600 is needed to turn the outlook bullish.
Nifty (14595.60, +30.75, +0.21%) and Sensex (49584.16, +91.84, +0.19%) remain stable over the last few days and are managing hold above their immediate support levels of 14400 and 49000 respectively. While above these supports, the view of seeing 15000 (Nifty) and 51500 (Sensex) on the upside will remain intact. However, from a bigger picture, we remain cautious at these levels rather than becoming more bullish as sharp correction can come into play any time.
COMMODITIES
Gold and Silver might be stuck in a range of 1860-1820 and 24-26 respectively and can hold for a few sessions within this range before giving further clarity on direction. Copper looks bullish towards 3.75/80 while Crude prices have also risen a bit and could move up slowly towards 58-60 (brent) and 55 (WTI) which are near term resistances that could hold to push them down eventually.
Brent (56.35) and Nymex WTI (53.64) have bounced back a bit after seeing a decline yesterday. On Brent there is important support zone of 55-53 which if holds could keep the upward momentum intact for a possible test of 58-60 resistance on the upside. Overall trade range of 55-60 looks possible for the near term. On WTI similar support is seen at 51. While above 51, view remains bullish. We would keep a close watch on immediate resistance at 55 on the WTI.
Gold (1850.40) seems to be stuck in a range of 1820-1860 and may continue for some more time before moving on either side of the range. Note that 1880 on the upside is important resistance and a eventual fall below 1820 looks more likely.
Silver (25.70) could also trade within 26-24 region for now before giving clarity on future direction from here.
Copper (3.6750) seems to rise again as immediate trend support at 3.55 is holding well for the near term. A rise to 3.75/80 looks likely soon.
FOREX
Dollar Index is stable while Euro needs to sustain below 1.2150 in order to move down further towards 1.2050 in the near term. EURJPY may test 125.78 while Aussie and Pound looks bullish for a possible rise to 0.78-0.80 and 1.38-1.40 on the upside. USDCNY remains stable while Dollar Yen and Dollar Rupee could move down towards 103-102.50 and 72.90-72.75 respectively.
Dollar Index (90.272) is holding above 89 but has not shown any signs of a sharp upmove breaking above 91 yet. As mentioned earlier, we would look for a rise to 91.00-91.50 on the near term before a dip is seen again. For the index to move up further towards 93-94, a necessary break above 92 is needed. We would wait and watch for a sharp rise above 91 to go bullish for the near term.
Euro (1.2148) needs to sustain the fall below 1.2150 in order to strengthen a possibility of a fall towards 1.2050. Watch price movement near current levels.
EURJPY (126.05) has dipped lower and could continue to move down to test 125.78. Overall the broad range of 125.78-127.50 is likely to hold for now.
Dollar-Yen (103.77) is likely to hold below immediate resistance at 104.50 and to eventually drop towards 103-102.50 in the medium term.
Aussie (0.7768) looks bullish for the near term towards 0.78-0.80. Near term uptrend is likely to hold for now.
Pound (1.3681) looks bullish for an initial rise to 1.38 that could later on extend towards 1.40 in the longer run. Immediate view is bullish for the Pound.
USDCNY (6.4699) may remain stuck in the 6.4580-6.48 region for the near term. Immediate view is ranged.
USDINR (73.0450) needs to manage a break below 73 today in order to test 72.90 or lower levels of 73.80/75 before again bouncing back from there.
INTEREST RATES
The US Treasury yields have bounced back well especially at the far-end. The US Federal Reserve Chairman Jerome Powell saying that the rates will not be increased any time soon has helped the yields to bounce back. Key resistances are ahead on the yields that can cap the upside and drag the lower eventually going forward. The German yields have dipped further and keeps the broader bearish view intact. The 10Yr GoI is struggling to breach 5.95% and looks vulnerable to fall within its 5.86%-5.95% range in the near-term.
The US 2Yr (0.14%) and the 5Yr (0.47%) Treasury yields remain stable while the 10Yr (1.11%) and the 30Yr (1.85%)have bounced-back. Need to see if this bounce sustains or not. Our broader view remains the same. We see 1.20%-1.25% (10Yr) and 1.90%-1.95% (30Yr) as the cap on upside. While below these resistances, we expect the yields to test 0.90%-0.80% (10Yr) and 1.75%-1.70% (30Yr) on the downside initially and further deeper levels eventually over the long-term.
The German 2Yr (-0.74%) and 5Yr (-0.74%), 10Yr (-0.55%) and the 30Yr (-0.15%) have declined further sharply across tenors. The bearish view of seeing -0.60% (10Yr) and -0.20% (30Yr) on the downside is intact. This also keeps alive the chances of the fall extending to -0.30% (10Yr) and -0.70% (30Yr) over the medium-term.
The break above 5.95% on the 10Yr GoI (5.9261%)that was expected yesterday has not happened. The near-term outlook is mixed. 5.91%-5.95% is the narrow range seen so far this week. From a bigger picture, while the resistance at 5.95% holds, the chances of revisiting 5.88%-5.86% on the downside cannot be ruled out. Overall the broader 5.86%-5.95% range is still intact.
