STOCKS
Dow has managed to recover sharply from its crucial support level of 33500. A range of 33500-35000 is possible while it remains above 33500. DAX has to sustain the strong bounce seen yesterday to bring back the chances of seeing 15700-15800 and delay the fall to 14500. Nikkei has declined sharply below 28000 and is now bearish to see 27000-26000 while it remains below 28500. Shanghai can move up to test the upper end of its 3350-3500 range and then reverse lower again. Sensex and Nifty might see a short-lived bounce but are likely to remain under pressure to see further deeper fall in the coming days.
The crucial support level of 33500 has held very well and the Dow (34021.45, +433.79, +1.29%) has recovered sharply yesterday. While above 33500, a range of 33500-35000 is possible and the broader trend will continue to remain up. A strong break below 33500 is needed to turn the outlook bearish for seeing 33000-32000 and lower levels. The price action in the coming days will need a close watch.
DAX (15199.68, +49.46, +0.33%) fell to test 14800 as expected but had risen back sharply above 15000 again. It will have to be seen if this bounce sustains and see a further rise to 15400 to bring back the chances of seeing 15700-15800 into the picture. Such a rise will reduce the danger of seeing a deeper fall to 14500. We will have to wait and watch.
Nikkei (27895.37, +447.36, +1.63%) tumbled to a low of 27385 yesterday and has recovered sharply today. The outlook is bearish to see 27000-26000 on the downside while Nikkei remains below 28500. A strong rise past 28500 is needed to turn the view bullish again.
Shanghai (3449.91, +20.37, +0.59%) is getting intermediate support at 3420 over the last couple of days. This keeps the chances high of testing 3475-3500 on the upside in the near-term. We expect Shanghai to reverse lower again thereafter and retain the 3350-3500 range.
Nifty (14696.50, −154.25, -1.04%) and Sensex (48690.80, −471.01, -0.96%) fell sharply breaking below 14800 and 49000 respectively as expected. 14600 (Nifty) and 48500 (Sensex) are important immediate supports now. A break below it can drag the Nifty to 14400 and Sensex to 48000 initially. It will also keep the indices pressured to revisit 14200 (Nifty) and 47000 (Sensex) levels eventually. Any bounce from current levels could be short-lived and can face resistance at 14800 (Nifty) and 49000 (Sensex).
COMMODITIES
The spread of corona virus especially in South Asian countries are leading to fresh lock down restrictions dampening the oil demand and putting pressure on the oil prices in addition to the news of reopening of the Colonial pipeline after it was temporarily halted last week due to cyber attack. Bothe Brent and WTI trade lower and need to bounce from supports near 66-5.75 and 62.50 respectively. Gold may test 1800 and Silver could fall to 27-26.5 before bouncing back from there. Copper has support at 4.60.
Brent (66.69) and WTI (63.53) have dipped sharply maintaining the respective resistances of $70 and $67. While the fall is in place, we may expect a test of 66-65.75 and 62.50 respectively from where a bounce could be possible. Overall broad range of 66-70 for Brent and 62.50-67 for WTI may hold for the near term.
Gold (1823) has scope for a dip to 1800 from where a bounce back to 1860 could be possible in the medium term. Immediate view is to see continued dip while US Dollar rises.
Silver (27.07) has dipped back to test support near 27.0-26.5 and may expect a bounce from there. Failure to hold above 26.50 could drag the price lower towards 26 or even 25 in the medium term. Watch price action near immediate support.
Copper (4.6845) has dipped too and could test support near 4.60 before rising back to higher levels again. Note that failure to hold above 4.60 could make the price vulnerable to a sharp fall towards 4.5 or even lower in the longer run. For now, we expect a bounce from 4.6.
FOREX
Dollar Index is stable near 90.75/80 levels that keeps Euro below 1.21. A bounce from 1.2050 could be possible in the near term. EURJPY looks bullish towards 135. Dollar Yen may rise to test 10. USDCNY and USDINR also could rise towards 6.50 and 73.60 respectively. Aussie and Pound looks bearish on the other hand and could be headed towards 0.77 and 1.39 respectively.
Dollar Index (90.75) has paused at higher levels. Any correction seen from here could be limited to 90.50 before a rise again towards 91+ levels is seen. Overall the index is bullish towards 91.50 in the near term.
Euro (1.2079) has fallen on Dollar strength. While above 1.2050-1.20, we may expect a bounce back soon towards 1.21+ again.
EURJPY (132.39) trades above 132 and could eventually move up towards 135 in the longer run. View is bullish on the cross.
Dollar-Yen (109.60) is trading higher after seeing a short corrective dip yesterday. A rise to 110 looks possible in the near term.
Aussie (0.7722) has broken below the lower end of the 0.78-0.7750 range mentioned on Wednesday. A sustained break below 0.77 could make it vulnerable to a fall towards 0.76 eventually. Watch price action near 0.77 in the near term.
Pound (1.4039) tested 1.40 yesterday and trades slightly higher today. If the Dollar continues to strengthen, we may expect a gradual break below 1.40 that could extend the fall towards 1.38.
USDCNY (6.4545) has risen as expected and could continue to move up towards 6.50 in the near term.
USDINR (73.4225) was stuck between 73.38-73.51 on Wednesday and has scope for a rise to 73.60 on the upside. We continue to look at 73.30/25 as the lower end of the trade range for the very near term.
INTEREST RATES
The US Treasury yields have moved up sharply over the last couple of days on the back of strong US inflation data. The outlook is bullish to see further rise in the coming days. The danger of breaking below their crucial supports that we had cautioned earlier stands negated now. The German yields are bullish after having broken their crucial resistances. The yields can move up in the coming days. The 10Yr GoI looks mixed within its overall downtrend. There are chances for it to resume the downtrend without seeing the corrective rise that we have been expecting for some time.
The US 2Yr (0.16%) Treasury yield remains stable while the 5Yr (0.83%), 10Yr (1.66%) and 30Yr (2.40%) have moved up further over the last couple of days. The chances are high for the yields to revisit 1.8% (10Yr) and 2.5% (30Yr) in the coming weeks. A break above 1.7% (10Yr) and 2.4% (30Yr) can accelerate the rally. As mentioned on Wednesday, the chances of breaking below 1. 45% (10Yr) and 2.15% (30Yr) is reduced now..
The German 2Yr (-0.67%), 5Yr (-0.51), 10Yr (-0.12%) and the 30Yr (0.42%) yields have moved up further and are retaining their strength. The outlook is bullish as the 10Yr and 30Yr are sustaining well above -0.20% (10Yr) and 0.35% respectively. A rise to 0% (10Yr) and 0.55% (30Yr) can be seen in the coming days. As mentioned on Wednesday, our earlier view of seeing a fall to -0.45% (10Yr) and 0.20% (30Yr) stands negated.
The 10Yr GoI (6.0092%) has to break above 6.02% decisively to see the corrective rise to 6.04%-6.06% and even 6.10%. While below 6.02% a dip to 5.96% can be seen again and it will also keep alive the chances of falling to 5.9% from here itself without seeing a corrective rise.
