STOCKS
Equities are showing some sign of weakness. The price action this week will need a close watch to see if the top is in place and the long awaited correction is getting confirmed. 30200-30000 on the Dow, 13600 on DAX, 28000 on Nikkei, 14200 on Nifty and 48000 on Sensex is crucial levels to watch this week. Shanghai has risen today following the GDP data release but will have to break above 3600 in order to bring back the bullish momentum.
Dow (30814.26, −177.26, -0.57%) has come-off below 31000. It will have to be seen if the fall extends this week. While below 31000, a test of 30200-30000 is possible this week which will give an early sign of reversal. A strong break below 30000 will confirm that a top is in place and will trigger the long awaited corrective fall to 29500-29000 going forward.
DAX (13787.73, −200.97, -1.44%) has declined sharply on Friday. A further fall below 13600 from here can drag it to 13200. Such a fall will reduce the chances of seeing the extended rise to 14500 and will be an early sign of a reversal. The price action in the coming days will need a close watch.
Nikkei (28282.74, −236.44, -0.83%) has dipped further and is heading down towards 28000. As mentioned on Friday, a strong fall below 28000 will confirm that a top is in place and drag Nikkei lower to 27000-26500. It will also negate the chances of seeing the extended rise to 29600 that we had mentioned last week.
Shanghai (3582.72, +16.34, +0.46%) has risen back sharply today after the GDP data release. But it will have to be seen if it can rise past 3600 again or not which is needed to strengthen the bullishness. Inability to breach 3600 will keep the chances alive of breaking below 3525 and see a fall to 3450 in the coming weeks. From a bigger picture, while above 3400, the broader trend will remain up.
Nifty (14433.70, −161.90, -1.11%) and Sensex (49034.67, −549.49, -1.11%) have declined sharply on Friday. The price action this week will need a close watch to see if the fall extends beyond 14400 (Nifty) and 49000 (Sensex). Such a fall can bring the indices under pressure to see a further fall to 14200 (Nifty) and 48300-48000 (Sensex) initially and further deeper eventually. It will also give an early sign of a top in place.
COMMODITIES
US Stimulus package and news of fresh coronavirus cases reported from China and their restrictions imposed rise concerns for near term oil demand and has dragged crude prices lower. But we may expect prices to recover soon. Gold and Silver trade slightly higher today and while Silver may remain ranged within 24-26. Gold could remain above 1800 for now but eventually fall towards 1780-1740 in the longer run. Copper is bullish while above support at 3.55.
Brent (54.64) has immediate support in the 54-53 region and while that holds, a bounce back to 58-60 could be possible in the medium term. Failure to hold above 53 would break the trend support coming from Nov’20 low near 35.50. Nymex WTI (52.00) has similar support near 51 and while that holds, we may expect a bounce towards 54-55 to be seen soon. A break below 51, if seen could drag the price lower towards 49. Watch price action near respective support levels.
Gold (1825.20) has bounced a bit but overall the trend looks bearish for a fall to 1780-1740 in the next couple of weeks. Immediate movement could be seen above 1800 for a few sessions.
Silver (24.88) may trade within 24-26 region for the near term.
Copper (3.60) is holding well above immediate support at 3.55 and while that holds, we may expect a gradual rise towards 3.70/75 again over the next few sessions. Overall view is bullish while above 3.55.
FOREX
Dollar Index is rising and could test 91.50 on the upside before falling back towards 90 or lower. Euro may test 1.2050-1.20 in the near term before bouncing back from there. Aussie and Pound look bearish for now. EURJPY looks strongly bearish towards 124.50. USDINR may remain ranged within 73.0-73.25 while above support at 73.0.
Dollar Index (90.754) has been rising well but could face rejection from 91.0-91.50 in the near term. 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 92 to go bullish for the near term.
Euro (1.2082) is holding above 1.2050 just now and needs to sustain above 1.2050 to again head higher targeting 1.2150-1.22. Failure to remain above 1.2050 would take if further down to 1.20 before a medium term bounce sets in.
EURJPY (125.31) looks bearish now over the next few sessions targeting 124.50 on the downside.
Dollar-Yen (103.69) has immediate trend resistance near 104.15 and while that holds, the pair may gradually fall towards 103 in the near term.
Aussie (0.77) may test support near 0.76 before a rise could be expected back towards 0.78 or higher.
Pound (1.3587) is holding below 1.37 and while that holds, we may expect trade within 1.37-1.34 for the near term.
USDCNY (6.4801) has risen and if it manages to remain above 6.48, we may expect a rise to 6.50 gradually. Immediate view is bullish for a test of 6.50 before a dip is seen again towards 6.46.
USDINR (73.0750) moved up to 73.15 on the upside on Friday before closing lower. While 73 holds as immediate support, we may expect immediate trade within 73.00-73.25 and the broad trade region of 73.00-73.50 to hold but a break below 73 would be needed to take it down to 72.75. Watch price action near 73 just now as while the support holds, view is ranged.
INTEREST RATES
The US Treasury yields have dipped on Friday and are indicating a turn-around. A further fall from here will give an initial confirmation of the reversal that we had been cautioning last week. We will have to wait and see. The German yields remain lower. The bearish view is intact and a further fall can be seen from current levels. The 10Yr GoI has risen above 5.95% and is now bullish to test 6%. The earlier bearish view stands negated now.
The US 2Yr (0.13%), 5Yr (0.45%), 10Yr (1.08%) and the 30Yr (1.83%)have dipped across tenors on Friday thereby failing to sustain the bounce witnessed on Thursday. The charts are indicating a turn-around that we had cautioned last week. A further fall from here can take the yields lower to 0.90%-0.80% (10Yr) and 1.75%-1.70% (30Yr) on the downside initially in line with our expectation and then further deeper eventually over the long-term.
The German 2Yr (-0.73%), 5Yr (-0.74%), 10Yr (-0.54%) and the 30Yr (-0.14%) remained lower and stable on Friday. The view remains bearish. A fall to -0.60% (10Yr) and -0.20% (30Yr) can be seen in the near-term and -0.30% (10Yr), -0.70% (30Yr) over the medium-term.
The 10Yr GoI (5.9753%)has risen sharply breaking above the key resistance level of 5.95%. While above 5.95% the outlook is bullish to see a test of 6%-6.02% on the upside and then a reversal is possible. The chances of seeing 5.88%-5.86% on the downside that we had mentioned on Friday stands negated now.
