STOCKS
Equities remain positive overall except the Nikkei that fell sharply amongst the rising global equity indices. Dow sustains well above 35500 and is bullish to test 36000. DAX is bullish towards 16000-16200 while above 15800. Nikkei has fallen contrary to our expectation and is bearish towards 27000-26500 before a bounce is seen in the longer run. Shanghai can move up to 3580-3600 while above 3500. Sensex and Nifty have broken their sideways consolidation and keep our bullish view intact. As mentioned earlier, Sensex and Nifty can outperform others rising towards 56000 and 16600+ eventually.
Dow (35515.38, +15.53, +0.044%) has risen slightly in line with our expectation of a rise towards 35600. The view is bullish for this week. As mentioned on Friday, 35250-35000 will now act as a good support and limit the downside for now.
DAX (15977.44, +39.93, +0.25%) has sustained the breakout of the 15200-15800 range. This keeps our bullish view intact of seeing 16000-16200 in the coming days. 15800 will now be a good resistance-turned-support and can limit the downside.
Nikkei (27441.12, -536.03, -1.92%) has fallen below 28000 which was crucial support that we had mentioned last week. While the index holds below 28000, there is scope to fall towards 27000-26500 in the coming sessions. We need a strong break above 28000 again to turn bullish on Nikkei.
Shanghai (3528.82, +12.52, +0.36%) on the other hand is holding above 3500 and is eventually bullish to rise towards 3600. Thereafter, a strong rise past 3600 will negate the danger of seeing a fall to 3400 in the coming sessions.
Sensex (55437.29, +593.31, +1.08%) has also risen sharply in line with our expectations. The view is still bullish to see a break above 56000 before we see a corrective fall towards 54500 again.
Nifty (16529.10, +164.70, +1.01%) has made a strong close above the level of 16500 in line with our expectations. The view is bullish to see a break above 16600 as well in the coming sessions. A corrective fall towards 16400/350 is possible from 16600 but could be short lived.
COMMODITIES
Brent and WTI have come down and looks bearish towards $65.Gold has risen slightly, While above 1750 the view is bullish to see a test of 1800-1820.Silver has bounced back from the low of 23.2 in line with our expectations and looks bullish towards 24.50 in the coming sessions. Copper is stable near 4.40, a sharp break above 4.40 will be needed for it to rise towards 4.60 else a fall towards 4.20 is possible.
Brent (69.72) and WTI (67.57) have come down significantly. The fall is seen because the U.S encouraged OPEC and its allies to increase production to lower the prices and fuel an economic recovery. Adding to this, the International Energy Agency (IEA) lowered its forecast for oil demand for the rest of the year as Covid cases spike again globally. The view is now bearish to see a fall towards $65 on both Brent and WTI in the near term.
Gold (1779.20) is holding above 1750 and while that holds, the view is bullish towards 1800/1820. On the contrary, if gold fails to sustain above 1750, we may have to allow for a fall back to 1700 in the next few sessions.
Silver (23.68) tested 23.20 before bouncing back to higher levels as expected. While above 23, a rise to 24.50 looks likely.
Copper (4.3610) is almost stable. We would see if it manages to break above 4.40 or come off towards 4.20 in the near term. A break above 4.40, if seen and sustained, can take it higher towards 4.60/80 eventually. Watch price action closely near 4.40.
FOREX
Dollar Index fell after the preliminary estimate of the August Michigan Consumer Sentiment Index, plunged to 70.2, its lowest in almost a decade. But the index needs to break below 92.0-91.75 to head lower else a bounce back could be seen soon. Euro can rise to 1.1850 but unless a sharp and sustained break above that is seen, we may expect a pullback in the next 1-2 weeks. Aussie is stable while pound has bounced well and looks bullish for the very near term. USDCNY is stable too while above 6.47. USDJPY may test 109-108.50/30 before bouncing from there. Need to keep a close watch on USDINR to see if it breaks below 74.20 this week.
Dollar Index (92.50) has fallen sharply. The index needs to sustain the fall and break below 92-91.75 to decline sharply in the medium term. Watch price action near 91.75 while the index looks bearish for the near term.
Euro (1.1796) has bounced well from 1.17 but unless a sustained break above 1.18-1.1850 is seen, we cannot turn bullish for the medium term. Watch interim resistance near 1.1835/40 which could produce a short rejection.
EURJPY (129.02) is falling sharply and could test 128.50 before attempting to bounce back from there. Immediate view is bearish.
Dollar-Yen (109.35) has fallen sharply and is headed towards 109 which if breaks can drag the pair towards 108.30-108.00 before another bounce from there is seen. Overall a broad range of 110.50/80-108.30/00 can hold for the next 1-2 weeks. Immediate view is bearish towards 109 and lower.
Aussie (0.7345) is almost stable. There is support near 0.7325 from where a bounce looks possible.
Pound (1.3865) has held above 1.38 to bounce back sharply. While above 1.38, we may expect Pound to trade within 1.38-1.39 for sometime before breaking on either side of the range.
USDCNY (6.4765) fell from 6.4890 last week but is holding above 6.47, unable to fall further. Failure to fall below 6.47 could keep the range of 6.47-6.49/50 possible for this week.
USDINR (74.25) has held above 74.20 last week but we need to see if this manages to hold above 74.20 this week or breaks lower to test 74.00-73.80 eventually. Watch price action near 74.20 this week.
INTEREST RATES
The US Treasury yields have declined sharply on Friday. A preliminary data release from the University of Michigan showing a sharp fall in the consumer sentiment for August had dragged the yields sharply lower. A further fall from here will reduce the chances of seeing an extended corrective rally that we have been mentioning so far. The German yields continue to trade stable above their key supports. We expect the supports to hold and trigger a corrective rally in the coming weeks before the broader downtrend resumes. The 5Yr GoI looks mixed and unclear. It can remain in a broad sideways range for some time.
The US 2Yr (0.21%) Treasury yield has dipped slightly, while the 5Yr (0.76%), 10Yr (1.26%) and the 30Yr (1.91%) have declined sharply on Friday. The 10Yr has declined below 1.3% and can extend the fall to 1.18% while it remains below 1.3%. The 30Yr can test 1.85%-1.8% on a break below 1.9%. Such a fall will reduce the chances of seeing an extended corrective rally to 1.4%-1.45% (10Yr) and 2.1%-2.2% (30Yr) that we have been mentioning. We will have to wait and see.
The German 2Yr (-0.75%), 5Yr (-0.73%), 10Yr (-0.47%) and 30Yr (-0.03%) yields remain lower and stable in the key support zone. The 10Yr is poised in the -0.45%/-0.50% zone and the 30Yr is just above its support at -0.05%. We retain our view of seeing a corrective rally to -0.30%/-0.25% (10Yr) and 0.10% (30Yr) in the coming weeks from here. Thereafter the broader downtrend can resume again.
The 5Yr GOI (5.7326%) dipped to 5.72% but has bounced back again into the 5.73%-5.78% range again on Friday. The near-term outlook is mixed. We can expect the 5Yr GoI to oscillate in a broad range of 5.7%-5.78%/5.8% in the coming days.
