STOCKS
Dow fell sharply to test 34000 as expected. It has to sustain above 33500 in order to avoid much deeper fall and also to indicate a top in place. DAX can break below 15000 on the back of the sell-off in the US equities yesterday. That will negate the chances of seeing 15700-15800 on the upside that we were expecting. Nikkei is breaking its 28500-30500 range on the downside and can test the next crucial level of 28000 which will have to hold to avoid a deeper fall. Shanghai has risen sharply within its 3350-3500 range. It can now test the upper end of this range contrary to our expectation to test the lower end that we have been mentioning so far. The upside int he Sensex and Nifty can be capped at 50500 and 15100. We can expect them to fall in the coming days.
The test of 34000 mentioned yesterday on the Dow (34269.16, −473.66, -1.36%) has happened much faster than we had expected. As mentioned yesterday, 34000 and 33500 are crucial supports to watch. A strong break below 33500 will turn the outlook bearish to test 33000 and lower levels. While above 33500, a range of 33500-35000 can be seen for some time. The price action in the coming days will need a close watch.
DAX (15119.75, −280.66, -1.82%) fell sharply to test 15000 yesterday. The chances are high for it to break 15000 and fall to 14800-14500 from here itself on the back of the sell-off in the US equities yesterday. In that case the rise to test 15700-15800 will get negated. DAX has to sustain above 15000 to keep the chances alive of seeing 15700-15800. We will have to wait and watch.
Nikkei (28420.66, −187.93, -0.66%) is breaking the 28500-30500 range on the downside. 28000 will be the next crucial support to watch. As mentioned yesterday, Nikkei will have to sustain above 28000 to keep the overall uptrend intact and bounce-back again. A break below it will indicate a trend reversal and drag the index to 27000-26000 going forward.
Shanghai (3447.63, +5.79, +0.17%) has risen-back sharply from the low of 3384.7. The test of 3350 that we had expected has not happened. Shanghai can now face resistance in the 3475-3500 region and fall-back again to keep the 3350-3500 range intact.
Nifty (14850.75, −91.60, -0.61%) and Sensex (49161.81, −340.60, -0.69%) fell yesterday but are holding above their intermediate support levels of 14800 and 49000 respectively. However, we expect the upside to be capped at 15000-15100 (Nifty) and 50000-50500 (Sensex). While below these levels a fall to 14600-14400 (Nifty) and 48500-48000 (Sensex) cannot be ruled out in the coming weeks.
COMMODITIES
Most commodities trade lower today except the Copper where bullish steam seems to be intact. Crude prices have risen slightly but trade below respective resistance levels. Immediate view is to see some sideways ranged movement before a sharp break on either side is seen. Gold has dipped a bit but while it manages to remain above 1820, a rise towards 1860 or higher cannot be ruled out. Silver looks stable. Copper may continue to rise towards 4.95/5.00 while above 4.70/75.
Brent (68.64) and WTI (65.37) have risen slightly but is likely to continue trade below respective resistances of $70 and $67 this week. Immediate supports are seen near $66-67 and $63-62. Only a sharp break on either side would indicate further direction from here.
Gold (1829.30) has dipped today after maintaining trade above 1830 for the last couple of sessions. While above immediate support near 1820, there is scope for a steady rise to 1860 or even higher in the longer run.
Silver (27.47) has risen slightly. While there is scope for a rise towards 28-29 in the longer run, downside could be limited to 27 just now. Any break below 27 would make it bearish for the medium to long term.
Copper (4.7830) has risen yet again and could continue its rally towards 4.95/5.00 in the longer run while it sustains above 4.70/75 levels.
FOREX
Dollar Index has bounced well and dragged down Euro, EURJPY, Aussie and Pound. Euro could test 1.21, EURJPY may trade between 131.70-132.55, Aussie and Pound could fall towards 0.7750 and 1.40 respectively. USDJPY is ranged while above 108.30 and could head towards 110 on a break above 109. USDCNY may rise to 6.45/46. USDINR may trade within 73.60-73.25 but weakness in Yuan and Euro may indicate Rupee weakness today. We would keep a close watch on that.
Dollar Index (90.35) has bounced back well and could rise to 90.50 in the very near term. A break above 90.50 if seen and sustains, could take the index further up towards 91. That if seen could indicate bearishness for other major and EM currencies in the near to medium term.
Euro (1.2124) has dipped and could be headed towards 1.21 from where a bounce could be possible that could take Euro higher again towards 1.22. Note that 1.22 is a crucial resistance on the upside and may hold for sometime now.
EURJPY (132.07) has fallen sharply from levels near 132.50/55 and while that holds, the cross may trade between 131.70-132.55 region for sometime.
Dollar-Yen (108.88) is stable between 109-108.30. A break on either side will be needed but a strong Dollar index suggests a possible rise in USDJPY towards 110.
Aussie (0.7807) has fallen sharply despite the rise in Copper. The fall has been dominated by strong Dollar and if the fall continues, we may expect a test of 0.78-0.7750 on the downside soon. 0.79 has proved to be a crucial resistance for the near to medium term.
Pound (1.4117) has paused its rally near 1.4170 and could trade within 1.4170-1.4100 for now before again trying to rise higher in the medium term. View is bullish while above 1.41 for a test of 1.42 or higher. A break below 1.41, if seen would indicate a short term corrective fall that may extend towards 1.40 on the downside.
USDCNY (6.4361) has risen aided by a stronger Dollar and the pair may rise to 6.45/46 on the upside soon. Medium term looks bullish.
USDINR (73.3450) dipped to close lower yesterday after testing 73.52 on the upside. Trade within 73.25-73.60 could be seen over the next few sessions with possible extension to 73.00 on the downside. A successive break above 73.60 may negate a test of 73 and indicate further rise towards 73.80 or higher in the longer run. Weak Yuan and Euro suggests that the Rupee could also weaken today.
INTEREST RATES
The US Treasury yields have risen further thereby reducing the danger of breaking the key supports. The uptrend is still intact and a further rise is possible in the coming days. The US Consumer Price Index (CPI) inflation data release today will need a close watch as it can impact the yield movement. The German yields have risen past their resistances contrary to our expectation to see a reversal. While this break sustains a the yields can move up further. The 10Yr GOI seems to lack strength and can resume the downtrend from here itself without seeing a corrective rise.
The US 2Yr (0.16%) Treasury yield remains stable while the 5Yr (0.80%), 10Yr (1.63%) and 30Yr (2.35%) have risen well. This has reduced the danger of seeing a fall below 1. 45% (10Yr) and 2.15% (30Yr). As mentioned yesterday, a strong rise past 1.7% (10Yr) and 2.4% (30Yr) will bring back the bullish momentum to see 1.8% (10Yr) and 2.5% (30Yr) on the upside. The uptrend is still intact.
The German 2Yr (-0.68%), 5Yr (-0.55), 10Yr (-0.16%) and the 30Yr (0.40%) yields have risen sharply across tenors. The 10Yr and 30Yr have risen past their crucial resistance levels of -0.20% (10Yr) and 0.35% respectively. While this break sustains the yields can surge to 0% (10Yr) and 0.55% (30Yr) in the coming weeks. Our earlier view of seeing a fall to -0.45% (10Yr) and 0.20% (30Yr) stands negated.
The 10Yr GoI (6.0080%) sustains above 6% but is not breaking above 6.02% decisively. This indicates lack of strength to get a strong follow-through rise. It also increases the chances of seeing a fall to 5.90% from here itself without seeing the corrective rise to 6.04%-6.06% and 6.10% that we have been mentioning over the last few days.
