STOCKS
Shanghai is breaking below its crucial long-term support at 3400. This will be very crucial as a deeper fall to 3200 is possible if this break sustains. Nikkei remains weak and can fall to 27000 while below 30000. Sensex and Nifty can consolidate sideways for some time. Dow and DAX have broken above their key near-term resistances but will have limited room on the upside from here. As such we will be cautious rather than becoming more bullish as they both move further higher from here. Overall, Asians are looking weak, especially with Shanghai signaling a trend reversal. We continue to retain our cautious stance on the equity segment.
Dow (31802.44, +306.14, +0.97%) surged to a high of 32148.04 and has come-off from there. Strong resistances are in the broad 32200-33000 region. As such we expect the upside to be capped at 33000 and a sharp corrective fall can be seen going forward. As such we will be cautious and be on the sell side of the market if the Dow rallies above 32000 rather than becoming more bullish.
DAX (14380.91, +460.22, +3.31%) has surged breaking above 14200 thereby paving way for an extended rise to 14600 before the expected reversal happens. 14600 and 14900 are crucial resistances to watch now from where we can see the DAX reversing lower towards 14000-13800 again. The fall to 13600-13200 that we have been mentioning so far will get delayed now.
Nikkei (28800.81, +57.56, +0.2%) failed to sustain the break above 29000 yesterday and continues to show lack of strength. This keeps our view of seeing a fall to 27000. As mentioned yesterday, a strong rise past 30000 is needed to become bullish again and negate the fall to 27000.
Shanghai (3397.18, −24.23, -0.71%) fell sharply below the crucial level of 3400 to make a low of 3328.31 and has bounced-back from there. Early signs of a trend reversal are being seen. While the break below 3400 sustains, a further fall to 3250-3200 can be seen in the coming days. That in turn will negate the long-term bullish view of seeing 4400 on the upside.
Sensex (50441.07, +35.75, +0.07%) and Nifty (14956.20, +18.10, +0.12%) remained stable yesterday. We retain our view of seeing a sideways consolidation between 49000 and 52000 (Sensex) and 14600-15200/15400 (Nifty). While below 52000 (Sensex) and 15400 (Nifty) the bias is bearish to see a downside break of the range and fall to 48000-47000 (Sensex) and 14200-14000 (Nifty) eventually.
COMMODITIES
Most commodity prices have corrected from the sharp rise seen yesterday and could continue the corrective dip for a couple of sessions at least before again moving higher. Gold may hold above support near 1650/60 and bounce back towards 1720 in the near term while Silver may fall towards 24 while below 26. Copper may remain ranged within 4.00-4.25 in the next few sessions.
Brent (68.64) and WTI (65.36) have both dipped from higher levels of 71.38 and 67.76 seen yesterday. The corrective dip could continue to extend towards 68-66 on Brent and 65-63 on WTI before again bouncing higher.
Gold (1684.20) had tested 1712 yesterday but could not sustain the rise and instead fell back to levels below 1700. Currently trading near 1684, there is scope for a fall towards 1660/50 in the near term. Note that 1660/50 is a crucial level which if holds could keep the price within 1650-1720 region in the near term. Failure to hold above 1660/50 would trigger a fresh fall in prices indicating a sharp reversal that may well extend towards 1600 and lower in the longer term. For now watch price action near 1660/50 for a bounce.
Silver (25.29) has fallen exactly from earlier support turned resistance near 26 and while that holds, view is bearish towards 24 in the near term. Only a break above 26 can negate further upside which looks less likely for now.
Copper (4.0660) has also dipped from 4.1705 seen yesterday. A range of 4.00-4.20/25 looks possible for the near term.
FOREX
Dollar Index may test 92.50-93.00 on the upside before falling off from there which could limit Euro at 1.1850-1.1800. EURJPY has risen well and could test 130 on the upside. A break above 130 may open up chances for a rise towards 135. Aussie may hold above 0.76 while Pound may attempt a bounce too from current levels. USDCNY may remain ranged within 6.55-6.50 before again resuming its uptrend towards 6.60. USDINR may test 73.50/60 before declining from there.
Dollar Index (92.354) may come off from 92.50-93.00. Note that 93 is the maximum upside we are looking at within the current rally from where a decline looks possible.
Euro (1.1855) needs to bounce from 1.1850 now to avoid falling to 1.18 or lower in the near term. Watch price action near current levels to see if the Euro manages to bounce from here or fall further down.
EURJPY (129.45) has risen well and may re-test 130 on the upside before dipping back from there. A break above 130, if seen would open up chances of 135 on the upside.
Dollar-Yen (109.20) is fast rising towards its target of 110 on the upside from where a decline looks possible in the medium term. Immediate view is bullish towards 110.
Aussie (0.7656) may hold above 0.76 in the near term and eventually rise towards 0.77 or higher in the medium term.
Pound (1.3835) has support at 13780 which if holds could produce a bounce to higher levels of 1.39/40 again in the near term.
USDCNY (6.5252) continues to move up. We may expect an immediate range of 6.56-6.50 before attempting further rise to 6.60 in the medium term. Overall view is bullish for the pair.
USDINR (73.2550) moved up to test 73.29 before closing at 73.2550. While the pair was majorly trading within our expected range of 73.20/25-72.90/80 mentioned for yesterday, we may expect a possible test of 73.50 on the upside in the very near term before a dip back towards 73.20 is seen in the medium term. 73.50/60 is a crucial resistance above current levels and is capable of producing a sharp decline from there towards 73 or lower again. Watch for a possible rise to 73.50
INTEREST RATES
The US Treasury yields continue to hover higher. The crucial resistance at 1.6% on the 10Yr is holding and the price action in the coming days will need a close watch to see if it is reversing lower or breaking above this hurdle. The German yields sustain higher and keep the bullish view intact. They have room to move up further from here. The 10Yr GoI can consolidate sideways with a bullish bias to break the range on the upside and move up further before a reversal happens.
The US 2Yr (0.16%) and 5Yr (0.83%) Treasury yields have inched up slightly while the 10Yr (1.56%) and 30Yr (2.28%) have dipped from levels seen in early Asian trades yesterday. The crucial level of 1.6% on the 10Yr is continuing to hold. Inability to breach 1.6% can drag the 10Yr to 1.40% in the coming days. However, the 30Yr still has room to test 2.50% on the upside. If the 30Yr continues to rise then the 10Yr also can breach 1.6% and move up towards 2% in the coming weeks. We will have to wait and watch.
The German 2Yr (-0.69%), 5Yr (-0.60%), 10Yr (-0.28%) and 30Yr (0.22%) yields have moved up across tenors. Our view remains bullish. The 10Yr can move up to -0.20%/-0.15% and the 30Yr can rise to 0.35%. Thereafter a reversal is possible. As mentioned yesterday, a break below -0.40% (10Yr) and 0.10% (30Yr) is needed to negate the bullish view.
The 10Yr GoI (6.2226%) failed to sustain the break above. 6.24% yesterday. This keeps the current 6.18%-6.24% range intact. We retain our view of seeing 6.28%-6.30% on the upside first before a sharp reversal is seen. A strong fall below 6.18% will be needed to negate the rise to 6.28%-6.30% and drag the yield to 6.14%-6.10% from here itself.
