STOCKS
Sharp fall in equities across the globe. Equities are now under pressure as the increasing concerns of the delta variant Covid-19 spread and a slowdown on the back of it is weighing high on the sentiment. There is room for further fall from here. However, crucial supports are there for the indices which have to be broken to become bearish from a long-term perspective. Dow has tumbled below 34500 and has room to test the crucial support level of 33000. DAX has important support at 15000 which has to hold to avoid a much deeper fall. Similarly Nikkei has immediate support in the 27200-27000 region which will need a close watch to see if that is holding well and producing a strong bounce. Shanghai is retaining its 3500-3625 range for now. Sensex and Nifty can fall on the back of the sell-off in other markets. But strong support are there at 52000-51000 (Sensex) and 15600-15500 (Nifty) while above which the broader view remains still bullish.
Dow (33962.04, −725.81, -2.09%) has tumbled below the support at 34400. As mentioned yesterday this break can now pave way to test 33500 on the downside and even 33000 in the coming days. For now 33000-35100 is still the consolidation range within the overall uptrend. But, incase of a break below 33000, we may have to allow for a much deeper fall to 32000 before the resumption of the uptrend is seen.
DAX (15133.20, −407.11, -2.62%) has broken the 15300-15800 range on the downside. This has negated our view of seeing 16000-16200 on the upside immediately. 15000 is the next crucial support which if broken can drag DAX to 14800 in the coming days. Thereafter a fresh rise is possible.
Nikkei (27564.52, −88.22, -0.32%)) has declined further but has immediate support in the 27200-2700 region which will need a close watch. While this support holds, a bounce to 29000 can be seen again. That will keep Nikkei inside the 27000-29500 range within the broader uptrend. But as cautioned yesterday, we may have to allow for a deeper fall to 26000 in case if Nikkei breaks below 27000 just now.
Shanghai (3520.83, −18.29, -0.52%) is managing to hold above 3500 and retain the 3500-3625 range. However, the danger of breaking below 3500 and seeing a fall to 3450-3400 is still there which will then delay the expected rise to 3700-3800. As mentioned yesterday while above 3400, the long-term trend is up.
Sensex (52553.40, −586.66, -1.10%) fell back sharply into the 52000-53000 range yesterday as expected and can test 52000 in the coming days. As mentioned yesterday, 52000 and 51000 are strong supports while above which the broader trend will continue to remain up. Only a break below 51000 will turn the view bearish.
Nifty (15752.40, −171, -1.07%) has also come back into the 15600-15900 range as mentioned yesterday. The broader trend will still remain up as long as Nifty stays above its 15600-15500 support zone. The bullish view of seeing 16000-16200 on the upside will come under threat of getting negated only on a break below 15500.
COMMODITIES
The impact of the increase in production by OPEC+ continues on crude prices as a sharp fall was seen overnight. Also adding to this is fears of surplus as the COVID19 infection coming in from the Delta variant seems to be increasing in many countries. Some countries have cut on crude imports as they see reduced demand and fear oversupply. Crude prices could continue to fall in the near term although some recovery is seen just now as the Dollar comes off a bit. Gold, Silver and Copper too see some recovery on slight weakness in the US Dollar.
Brent (69.01) can fall towards 64 before bouncing back from there. The expected fall is intact while the price remains below 70 in the near term. WTI (66.85) on the other hand can fall to test 62/60 if it sustains a fall below 68/66 in the near term. Although both prices have bounced back a bit after falling sharply overnight, we need to see if the bounce sustains.
Gold (1818.50) has bounced back well unable to break below 1800. The rise looks positive and a break above 1820 could increase momentum for a test of 1840/60 on the upside in the medium term.
Silver (25.28) is bullish while above 25. A range of 25-26.50 may hold for now.
Copper (4.2135) is trading near the lower end of the 4.20-4.40 region and if a break below 4.20 is seen, the price can be vulnerable to a fall towards 3.8. Preference is to see a bounce from current support.
FOREX
Dollar Index has recovered a bit after coming down from 93.03. While the fall sustains, Euro can head towards 1.1830/50. EURJPY can rise to 130 before declining again from the in the medium term. Aussie and Pound have bounced a bit but it is not clear if it is a reversal or short lived corrective upmove. USDJPY tested 109.06 but has bounced back well from there. It could test 109.80-110 on the upside. USDCNY may face rejection from 6.49/50. USDINR may face rejection from 75
Dollar Index (92.813) did rise to 93.03 but has fallen from there back to levels below 93. We need to watch if the current dip extends down to 92 or if it is short lived and could soon rise back to 93+ in the near term. The view is still unclear as chances of a rise past 93 still remains high.
Euro (1.1796) has bounced a bit but we need to see if it manages to rise sharply from here or continue to hover within the 1.1750-1.1850 region. Unless a sustained break above 1.1850 is seen, it may be difficult to expect a bullish move in the medium term.
EURJPY (129.25) tested 128.89 yesterday before bouncing back from there. While the bounce sustains, it can test 130 before again falling from there.
Dollar-Yen (109.55) did test 109.06 before bouncing back sharply from there. 109.0-109.50 is an immediate support which if holds could keep the pair higher and take it towards 109.85/110 in the near term before another fall is seen.
Aussie (0.7347) has bounced a bit from 0.7322 but we need to see if this can take Aussie past 0.74 or keep it lower in the near term. We cannot fully negate a possible fall again in the medium term towards 0.73.
Pound (1.3679) has fallen well and may see a short corrective dip in the near term before again extending towards 1.36. Overall trend is down.
USDCNY (6.4844) may face rejection at 6.49/50 and is likely to come down towards 6.46/44. Overall range of 6.44-6.50 may hold for now.
USDINR (74.8750) tested 74.9150 today but may hold below 75 today while Dollar has weakened a bit and Euro and Chinese Yuan may strengthen a bit against the Dollar. Any rise above 75 could turn bullish for the pair towards 75.25/50. Watch price action closely near 75 today.
INTEREST RATES
The US Treasury yields have declined sharply especially at the far-end. Increasing concerns on the economic slowdown and a sharp fall in equities are weighing on the yields. The 10Yr is at the crucial support while the 30Yr has broken the support contrary to our expectation. The 10Yr also looks vulnerable to break its supports and see a deeper fall as against our earlier view of seeing a corrective bounce from the current support itself. We will have to wait and watch. The German yields also look vulnerable for a deeper fall from here. The expected bounce from the immediate supports may not happen. The 10Yr and the 5Yr GoI may remain stuck in a narrow range for some time.
The US 2Yr (0.22%) Treasury yield remains stable while the 5Yr (0.71%), 10Yr (1.21%) and 30Yr (1.84%) have declined sharply. The 10Yr is at the crucial support level of 1.20%. A strong break below it will negate the chances of seeing a corrective bounce to 1.45%-1.5% that we have been expecting. Such a break will drag the 10Yr down to 1.1% and even 1% in the coming days. The 30Yr has already declined below the support at 1.9% contrary to our expectation. While below 1.9%, the 30Yr has room to test 1.8% and even 1.7% in the coming days.
The German 2Yr (-0.70%) and 5Yr (-0.66%), 10Yr (-0.39%) and 30Yr (0.08%) have come down further as expected and keeps our bearish view intact. The 30Yr is at a key support and a break below it can drag it to 0%. That will negate our earlier view of seeing a bounce from here. The 10Yr on the other hand has more room to test -0.45% and -0.5% on the downside in the coming days. Thereafter a fresh bounce is possible.
The 10Yr GoI (6.1918%) oscillated around 6.2% with muted trades. 6.18%-6.22% can be a near-term range. The 5Yr on the other is oscillating between 5.64%-5.7% range as expected. The bias is bearish to see a downside break of this range and test 5.6% eventually.
