STOCKS
Equities remain higher. Dow has risen above 31500 and can move up to 32000 before reversing lower. DAX consolidates above 14000 and seems to lack momentum to breach 14200. However, a strong sign for a correction has not emerged either. Nikkei will remain bullish to see further rise as long as it stays above 30000. Similarly, Sensex and Nifty can also move up further from current levels while they sustain above 52000 and 15250 respectively. Shanghai will have to be watched to see how it reopens tomorrow after being closed for a week. Overall as mentioned yesterday, the equity segment has room on the upside and we will have to wait for a strong signal to confirm a top is in place.
Dow (31522.75, +64.35, 0.20%) has risen above 31500 as expected yesterday and keeps intact our view of testing 32000 on the upside. As we have been cautioning for some time, 32000 is a crucial resistance from where we expect a corrective fall to 31000-30000 or even lower going forward.
DAX (14064.60, −44.88, -0.32%) seems to lack momentum to breach 14200. This leaves the near-term outlook mixed. Our broader view is to see a fall to 13600 and 13400-13200 over the medium-term. But whether this fall happens from here itself or after an extended rise to 14500-14600 remains unclear. A break below 13800 will be the trigger to drag DAX lower and negate the rise to 14500-14600.
Nikkei (30202.71, −265.04, -0.87%) has come-off sharply from yesterday’s high of 30714.52. But while above 30000 we retain our bullish view of seeing 33000-34000 on the upside mentioned yesterday. A strong break below 30000 is needed to negate the above mentioned rise and bring Nikkei under pressure for a corrective fall.
Shanghai (3655.09) is closed today also and will reopen tomorrow.
Sensex (52104.17, −49.96, -0.1%) and Nifty (15313.45, −1.25, -0.09%) have come-off from their highs of 52516.76 and 15431.75 yesterday. However, while above 52000 (Sensex) and 15250 (Nifty) we retain our bullish view of seeing 53000 (Sensex) and 15600 (Nifty). Only a break below 52000 and 15250 will negate the chances of any further rise and bring back the pressure on the indices. We will have to wait and watch.
COMMODITIES
Gold has fallen sharply and looks bearish for a test of 1760-1740 on the downside while Silver is ranged to bullish while above 26. Copper may rise towards 3.90. Crude prices look stable just now while below immediate resistances above current levels. Some pause may be seen before the rally resumes in the longer run.
Brent (63.22) and WTI (59.89) have dipped. Note immediate resistances near 65 on Brent and 63-63.50 on WTI that may hold for the near term and keep the prices stable or slightly lower for the rest of the week. For now watch out 65 on Brent and 63.50 on WTI.
Gold (1791.40) declined sharply breaking below 1800. We may look for a test of 1760-1740 on the downside before any bounce is seen from there again.
Silver (27.42) has dipped slightly but while it remains above 26, view is ranged to bullish for the near term.
Copper (3.8370) continues to rise and could test 3.90 before facing a short corrective dip from there. Immediate view is bullish.
FOREX
Dollar Index has risen dragging down Euro to levels below 1.21 but it looks short lived as the index may again head towards 90 soon taking Euro up towards 1.22 again. Aussie and Pound hold below 0.78 and 1.40 just now but the dip could be temporary as we may expect a break on the upside in the medium term. EURJPY has also dipped while USDINR and USDCNY trades higher but could see some ranged movements just now.
Dollar Index (90.649) rose but overall remains within the 91-90 range which could hold for some more time before a dip to 90 is seen. The index is finding difficulty in breaking below 90 just now and may remain ranged for now.
Euro (1.2095) fell from 1.2170 before testing 1.22 on the upside. We may not expect an immediate fall below 1.20 and look for a bounce back from there keeping the longer term bullish view intact.
EURJPY (128.13) has dipped slightly but could be short lived and soon see a bounce back to higher levels of 129.50-130 in the medium term.
Dollar-Yen (105.91) continues to move up and could test 106-106.50 on the upside soon before a corrective decline from there is expected. Immediate view is bullish.
Aussie (0.7752) has also dipped slightly while immediate resistance at 078 holds. But the dip looks short lived and we may expect a break above 0.78 soon.
Pound (1.3888) has dipped from yesterday’s levels while 1.40 is likely to hold just now but the dip is likely to be a short and corrective one followed by an eventual break above 1.40 in the longer run.
USDCNY (6.4540) is likely to remain ranged within 6.44-6.48 for now before a break on either side is seen. Long term view is bullish while above crucial support near 6.42/40.
USDINR (72.70) rose from 72.63 to 72.79 yesterday in line with our expectation of a rise to 72.80/85 on the upside. If the pair does not dip back from 72.85 today, we may expect the rise to continue towards 72.90-73.00 while 72.50 remains and holds as a strong support.
INTEREST RATES
The US Treasury yields have risen past their crucial resistances that we had expected to hold. While this break sustains there is room on the upside to see more rise from current levels. It will also negate our view of seeing a reversal/resumption of the long-term downtrend. The German yields continue to move up as expected. A further rise is possible to test their key resistances from where the German yields can reverse lower again. The 10Yr GoI has tested its intermediate resistance and is hovering below it. The price action in the coming sessions will have to be watched to see if the yield is breaking above the resistance or not.
Contrary to our expectations, the US 10Yr (1.30%) and 30Yr (2.08%)have broken above their crucial resistance levels of 1.25% and 2.05%. While this break sustains, a further rise to 1.45% and even 1.55%-1.60% on the 10Yr is possible. The 30Yr may have potential to test 2.20% and even 2.40% over the medium-term. It will also negate our earlier bearish view of seeing a reversal. The 10Yr will now have to fall below 1.20% in order to bring back the bearish view.
The German 2Yr (-0.70%), 5Yr (-0.64%), 10Yr (-0.35%) and 30Yr (0.16 %) continues to move up in line with our expectation. The near-term bullish view of seeing -0.30%/-0.25% (10Yr) and 0.20% (30Yr) remains intact. As mentioned yesterday, 0.20% is a strong resistance on the 30Yr that can halt the current upmove and trigger a reversal. The price action around 0.20% will need a close watch.
As expected, the 10Yr GoI (6.1123%, 05.77 GS 2030) broke above 6.10% but did not sustain. A sustained break above 6.10% is needed for the 10Yr to rise further to 6.15%-6.16%. While below 6.10%, a fall-back to 6.05% and even lower levels cannot be ruled out. The price action in the coming sessions will need a close watch.
The 10Yr GoI (05.85 GS 2030, 6.0222%) tested 6.04% but did not break above it. The yield will have to sustain above 6% in order to break 6.04% and move up further to 6.08%-6.10%. A fall below 6% from here will bring back the chances of seeing 5.93%-5.90% on the downside into play again.
