STOCKS
Dow has surged above 32000 but the upside could be capped at 33000 from where we expect it to reverse lower. Similarly DAX will also have limited upside from here upto 14900 and can turn down thereafter. Nikkei and Shanghai have bounced-back sharply over the last couple of days. But they have key resistances ahead which will have to be broken to become bullish and avoid a fall-back. Sensex and Nifty can test the upper end of their respective 49000-52000 and 14600-15400 range in the near-term. It will have to be seen if they can break their range on the upside. Overall we continue to retain our cautious stance on the equities as we see limited upside on them from current levels.
Dow (32485.59, +188.57, +0.58%) has risen sharply above 32000 over the last couple of days. As we have been mentioning for some time, the upside is likely to be capped at 33000. We expect the Dow to reverse lower thereafter towards 31000 and even lower. As such we will be cautious as the Dow heads higher from here.
DAX (14569.39, +29.14, +0.20%) has tested 14600 as expected and has room to move up to 14900 from here. However, thereafter we expect DAX to reverse lower and see a corrective fall to 14000-13800.
Nikkei (29488.74, +277.10, +0.95%) sustains above 29000 and is heading towards 30000. We reiterate that a strong break above 30000 is needed to become bullish. While below 30000 our bearish view of seeing 27000 on the downside remains intact.
Shanghai (3442.05, +5.22, +0.15%) has risen back sharply above 3400 again over the last couple of days. It is now important to see if it can break above 3450 now and rise past 3500 subsequently in order to negate the danger of seeing 3250-3200 on the downside that we have been mentioning over the last few days. The price action in the coming days will need a close watch.
Sensex (51279.51, +254.03, +0.50%) and Nifty (15174.80, +76.40, +0.51%) can head towards 52000 and 15400. A strong rise past these levels is needed to become more bullish again. Else, the indices can oscillate inside the 49000-52000 (Sensex) and 14600-15400 (Nifty) range in line with our expectation. The price action and the closing today will be very important.
COMMODITIES
Crude prices move higher. A rise in Brent to 72-73 and WTI to 70 looks possible for the near term. Gold needs to break above 1720 in order to move up to 1760 on the upside. Silver is bullish while above 26. Copper has bounced well from support at 4 and may rise towards 4.25/30 soon.
Brent (69.48) and WTI (65.78) have bounced well. Brent could move up to test 72-73 while WTI also has similar scope on the upside towards 70 which is an important monthly trend resistance. While WTI declines from resistance near 70 in the medium term, it could pull back Brent to lower levels too.
Gold (1716.90) and Silver (26.01) have risen from levels seen a couple of days ago. Silver may attempt to rise towards 26.50-227 if it sustains a rise above 26. Gold on the other hand may rise towards 1760 if it break above the immediate hurdle of 1720.
Downside could be limited to 1660 for the medium term.
Copper (4.0925) has bounced well from 4 and while that holds, we may expect a rise towards 4.25/30 in the near term.
FOREX
Dollar Index may see a small bounce from 91.50 before again falling lower. Euro trades above 1.1950 and while the rise sustains, view is bullish for the near term. USDCNY has broken sharply below 6.50 and needs to bounce back from 6.47 immediately to see another attempt to rise from here in the near term. Else we may expect some sideways movement. EURJPY has broken above 130 and could be headed towards 135 soon. Aussie and Pound look stable just now. USDINR may test 72.60 on a break below 72.90/80 today. Upside could be limited to 73.00-73.25 for the near term.
Dollar Index (91.562) has been falling well from resistance near 92.50 but has interim support at 91.50 which if holds could produce a short bounce to 92 in the very near term. Thereafter, we may expect a resumption of fall towards 91 or lower in the medium term.
Euro (1.1963) has broken above 1.1950 indicating a bullish turnaround. While above 1.1950, we cannot negate a rise towards 1.21/22 eventually. A small corrective dip could be seen from 1.20 before resuming its rise in the medium term. Overall view is bullish while above 1.1950.
EURJPY (130.12) has broken above 130 and is an indication of fresh upmove with initial target of 135 on the upside. Watch if the break above 130 sustains in the near term.
Dollar-Yen (108.74) is bouncing from 108.30 and while that holds, the possibility of testing 110 still holds for the near term before a sharp correction is seen from there. Immediate view is bullish.
Aussie (0.7776) rose to test 0.78 before dipping slightly from there. We have to see if the currency manages to break above 0.78 or decline from current levels back to 0.7750 and lower in the near term. While below 078, view remains bearish.
Pound (1.3976) is facing a decent rejection from 1.40 and while that holds, we may expect a dip to 1.3940-1.3900 in the near term. However, a break above 1.40 is needed to take the currency higher towards 1.41 eventually.
USDCNY (6.4878) fell sharply from 6.5439 and broke below 6.50 to current levels of 6.4878. This has been a sharp fall. We may restrict the fall to 6.47 from where a bounce back could be expected in the near term.
USDINR (72.91) closed below 73 on Wednesday and could open up lower or with a slight gap down today especially on the back of weak Dollar and a relatively strong Euro. A fall in USDINR towards 72.60 cannot be negated before a sharp rise sets in again towards 73.00-73.25 in the medium term. NDF quotes 72.66 just now.
INTEREST RATES
The US Treasury yields continue to hold higher. The US 10Yr has to surpass the key resistance at 1.6% in order to move up further. Else a corrective fall is possible in the Treasury yields. The German yields have come-off but have important supports coming up near current levels. The yields will have to fall below these supports to negate our bullish view. The European Central Bank (ECB) yesterday left the rates and stimulus unchanged. However, it will increase the bond purchase in the coming months to compensate for the previous quarter. The Indian 10Yr GoI has risen sharply on Wednesday but has an important resistance at 6.30% which can cap the upside and trigger a reversal.
The US 2Yr (0.14%), 5Yr (0.79%), (1.54%) and 30Yr (2.29%) sustains higher. We reiterate that the 10Yr will have to rise past 1.60% decisively in order to move up further towards 2%. While below 1.6%, a fall to 1.40% cannot be ruled out in the coming days. The 30Yr on the other hand has room to test 2.5% on the upside. It will have to be seen if the potential rise in 30Yr to 2.5% can aid the 10Yr to breach 1.6% or not.
The German 2Yr (-0.70%), 5Yr (-0.64%), 10Yr (-0.34%) and 30Yr (0.18%) have dipped across tenors. The 10Yr can dip to test its crucial support level of -0.40%. We expect this support to hold and keep the bullish view intact of seeing -0.20%/-0.15% on the upside. A break below -0.40% is needed to negate the bullish view. The 30Yr on the other hand oscillates around 0.20% over the last few days and keeps alive the chances of seeing 0.35% on the upside over the medium-term. Supports are at 0.15% and 0.10%.
The 10Yr GoI (6.2469%) surged to a high of 6.2723 on Wednesday contrary to our expectation to see a dip to 6.18%. We reiterate that the upside is likely to be capped at 6.28%-6.30% and the 10Yr GoI is likely to reverse lower towards 6.14%-6.10% over the medium-term.
