STOCKS
Sensex and Nifty retain their momentum and are bullish while others are yet to make a convincing breakout of their ranges. As mentioned yesterday, Sensex and Nifty will be outperformers. Dow has come-off below 35000 again and has chances to dip to 34250-34000 within its sideways range. DAX continues to look mixed and unclear within its 15200-15800 range. Nikkei is holding above the range support but needs to rise past 2800 to negate the danger of breaking the range on the downside. Shanghai has room to rise in the near-term.
Dow (34792.67, −323.73, -0.92%) has failed to sustain above 3500 and has come-off sharply. This keeps alive the chances of seeing a fall to 34250-34000 which will keep the broader 33000-35250 range intact. That in turn will delay the expected break above 35250 and the rise to 36000 that we have been expecting.
DAX (15692.13, +137.05, +0.88%) continue to hover around 15600. The immediate outlook is mixed and the chances are equal to see either side within the 15200-15800 range for now. From a bigger picture we retain our bullish view to see an upside break above 15800 and a rise to 16000-16200 eventually.
Nikkei (27648.10, +64.02, +0.23%) remains stable and continues to hold above 27500. A break above 28000 from here will ease the danger of seeing a break below 27000 and the fall to 26000 that we had cautioned earlier. For now the 27000-29500 range remains intact.
Shanghai (3478.42, +1.20, +0.04%) has risen above 3460 and keeps intact our view of seeing a rise to 3500-3550 in the near term. As mentioned yesterday, a sustained break above 3550 will bring back the earlier bullish view of seeing 3700-3800 on the upside over the medium-term. It will also negate the danger of seeing 3200 on the downside.
Sensex (54369.77, +546.41, +1.02%) has moved up to 54000 as mentioned yesterday and indeed has risen above that level as well. The outlook is bullish and a further rise to 56000 and even higher in the coming days. 53500-53000 will now be a strong support zone.
Nifty (16258.80, +128.05, +0.79%) has risen well above 16200 and is bullish to see 16500-16600 levels on the upside now. 16000-15900 will be a good support now that can limit the downside.
COMMODITIES
Crude prices have fallen as expected and Brent and WTI can rise from supports near 70 and 68 respectively. Gold, Silver and Copper trades lower and looks bearish for now while Dollar Index trades strong.
Brent (70.71) and WTI (68.50) trades lower as expected. It is needed to see if Brent falls below 70 or manages to bounce back in the near term. WTI too has support near 68 which is likely to hold on first testing.
Gold (1812.90) has fallen after testing 1831.71 yesterday. The spike yesterday was aided by the US jobs data but later in the US session, after the FED vice chair, Richar Clarida announced a possible taper by end of the year, US Dollar strengthened sharply dragging down Gold to lower levels. Gold can be stuck within 1840-1800 for the near term before any sharp movement on either side is seen from there. A re-test of 1800 on the downside cannot be negated.
Silver (25.41) tested 26 before coming down from there. It can now test 25 before again bouncing back to higher levels. Overall range of 24.50-26 may hold for now.
Copper (4.3420) trades below 4.40 and could test 4.30 soon. Thereafter, a break below 4.30 may take it further down to 4.20. Immediate view is bearish on Copper.
FOREX
Dollar Index trades strong after the announcements of a possible taper by end of the year as Euro fell sharply back to levels below 1.1850 and can fall to 1.18 or lower in the near term. Aussie and Pound have turned bearish. USDJPY is again headed towards 110-110.50 while EURJPY can head towards 130.50 in the near term. USDCNY has fallen and could bounce back from 6.45 while USDINR needs to hold below 74.25 else it can bounce back sharply towards 74.40/60 soon.
Dollar Index (92.317) has held well above 91.75 which has now pushed the index back to levels above 92.25 mentioned yesterday. While above 92.25, view of a fall back towards 91.75 or lower seems less and instead the index can rise further to test 92.50 or higher now. The rise was boosted by the FED’s new policy strategy that stated that the conditions for raising interest rates could be met by end of 2022. The FED’s vice chairman, Richard Clarida added that he could certainly see the FED announcing a reduction in its $120bln/month asset purchase program later this year, given the surprising pace of economic recovery from the pandemic. Immediate view is bullish on the Dollar Index.
Euro (1.1832) fell sharply, back below 1.1850 after a brief test of 1.19+ levels earlier this week. A fall towards 1.18 cannot be negated in the next few sessions before any bounce is seen again in the next couple of weeks. Euro seems bearish for the near term.
EURJPY (129.79) has bounced from levels just above support at 129 and while that holds, we may expect a slow and steady rise towards 130.50. A break above 130.50, if seen in the next few sessions would be strongly bullish.
Dollar-Yen (109.67) bounced back sharply from 108.72, pulled up by the rise in Dollar Index after statements by the FED vice chairman. If the rise sustains, we may expect a move back towards 110-110.50 soon.
Aussie (0.7386) seems to be rising slowly. Crucial resistance is seen near 0.7450-0.75 which if holds could push back Aussie sharply to lower levels of 0.73-0.72 in the medium term. Watch for an immediate rise towards mentioned resistance.
Pound (1.3880) is trading lower too, ready for a sharp fall below 1.3875. Such a break if seen is bearish for the near term and could take Pound down to 1.3850 initially and then towards 1.38. View is bearish while below 1.39.
USDCNY (6.4647) is holding below 6.47 now and could fall towards 6.46/45 again before attempting to bounce higher towards 6.48 in the near term.
USDINR (74.1850) is likely to hold above 74 but it needs a close watch to see if the rise in Dollar Index and sharp fall in Euro can pull up USDINR above immediate resistance of 74.20/25 or let it remain ranged for now. A break above 74.25 would indicate a rise back towards 74.40/60 again in the near term. Watch price action near 74.20/25 today. On the downside 74 is an immediate support to watch.
INTEREST RATES
The US Treasury yields have moved up yesterday following the comments from the Fed Vice Chairman Richard Clarida that the economic targets will be attained by next year end and the Fed will begin rate hikes in 2023. We retain our view of seeing a corrective bounce in the coming weeks before the overall downtrend resumes again. We will have to wait and see if the non-farm payroll data release on Friday can provide further trigger for this corrective rally to happen. The German yields have limited room on the downside and can reverse higher from here. The 10Yr GoI is at a resistance and can fall from here on muted trades. The 5Yr GoI can also fall from current levels while it remains below 5.74%. The Reserve Bank of India’s monetary policy decision is due tomorrow.
The US 2Yr (0.19%), 5Yr (0.69%) and 10Yr (1.20%) Treasury yields have risen from levels seen in the Asian session yesterday while the 30Yr (1.85%) remains stable. We see supports at 1.1% on the 10Yr and 1.8% on the 30Yr that can pause the current downtrend. A corrective rise to 1.45%-1.5% (10Yr) and 2.1%-2.2% (30Yr) can be seen in the coming weeks. Thereafter the overall downtrend can resume.
The German 2Yr (-0.79%), 5Yr (-0.77%), 10Yr (-0.50%) and 30Yr (-0.04%) yields have come down to test their key supports as expected. -0.5% (10Yr) and-0.05% (30Yr) are the key levels that we have been mentioning. We expect the yields to reverse higher either from here itself or after another 5 bps dip and see a corrective bounce to -0.30%/-0.25% (10Yr) and 0.10% (30Yr). Thereafter the broader downtrend can resume again.
The 10Yr GoI (6.3055%)remains stable around 6.3% with muted trading. We retain our view of seeing a fall back to 6.2%-6.1% from here. The 5Yr GoI (5.7102%) seems to lack strength to break above 5.74% and rise to 5.76% that we have been expecting. Inability to breach 5.74% can drag the 5Yr yield to 5.70%-5.68% in the near-term.
