STOCKS
Dow fell sharply after the US CPI data release yesterday but Dax trades in the green and test 15800. Nikkei and Shanghai need to remain above 30500 and 3700 to move up else a corrective fall can be seen. Nifty and Sensex look overall bullish.
Dow (34577.57, -292.06, -0.84%) fell sharply after the US CPI data came out lower yesterday. The index surprised with a fall to 34510 but while support at 34500 holds, the index may turn to rise in the near term. Failure to bounce from 34500 can bring in a fall towards 34000 in the medium term. Note that 34500 now acts as a “stop loss” for bullishness.
DAX (15722.99, +21.57, +0.14%) has risen slightly and could be headed towards 15800 and eventually towards 16000.
Nikkei (30510.05, -160.05, -0.52%) has reversed contrary to our expectation of a rise to 30700. Note that 28000 is an important support and while above that the index is bullish with some interim corrective dips. The fall seen yesterday may be short lived and can bounce from 30000.
Shanghai (3666.08, +4.18, +0.11%) is stable around 3700 and needs to sustain a break on the upside to turn bullish for the medium term. While below 3700, a fall back to 3600 looks possible.
Nifty (17380, +24.70, +0.14%) surged up to test the intraday high of 17438.55 and has come down. The consolidation mentioned between 17250-17500 is still holding well. Nifty can consolidate between 17250-17500 for some more time before we see an eventual rise above the level of 17500 and a test of 17800 levels.
Sensex (58247.09, +69.33, +0.12%) is rising steadily towards 59000.A strong break above 59000 is needed for the view to be bullish, else Sensex can consolidate for some time between 58000-59000.
COMMODITIES
Brent and WTI are stable but have resistance near 74/75 and 72 respectively that could produce a fall. Gold has risen well and needs to sustain above 1800 in order to move up further from here. Silver looks stable but is bullish while above 23.50. Copper may test 4.20 before rising from there. Failure to bounce from 4.20 can drag it towards 4.00.
Brent (73.89) and WTI (70.79) are stable near levels seen yesterday. We continue to expect immediate resistance near 74/75 on Brent and 72 on WTI to hold and produce a slight rejection from there.
Gold (1805.30) has risen slightly to break above 1800 and this needs to sustain for the price to move up towards 1820 or higher eventually. Else a fall back to 1780 cannot be negated. Watch price action near current levels.
Silver (23.84) is trading near the lower end of the 23.50-25 range. Within the range a bounce towards 24 and eventually 25 is possible. Any break below 23.50 would negate our bullish view and instead take the prices down towards 23-22. Watch price actions near current levels.
Copper (4.2995) fell sharply in line with expectations and can be headed towards 4.20 before a bounce is seen. Failure to bounce from 4.20 can drag it lower towards 4.00.
FOREX
Fluctuation seen in Dollar Index and most other currencies after a lower US CPI data release yesterday. Euro has fallen back to 1.18 and looks bearish towards 1.1775/50 from here a bounce is expected. Dollar Index is ranged. Aussie and Pound look strongly bearish while USDCNY can head towards 6.40/3750. EURJPY has fallen sharply and can test 129-128.50 soon. USDINR is also likely to fall towards 73.50/40. USDJPY looks weak and bearish towards 109.40/20.
Dollar Index (92.66) is fluctuating within 92.90 and 92.30 and unless a break on either side is seen it is ranged for the next few sessions. The index fell sharply to 92.32 after the US CPI release yesterday but recovered during the session and bounced back sharply. We would be in wait and watch mode for now.
Euro (1.1804) came down sharply from 1.1850. A range of 1.19-1.1750 looks possible for the near term. Unless a sharp and sustained break on either side is seen, it is difficult to project further movement. We would wait and watch price action for now. Expect a bounce from 1.1775/50 in the very near term.
EURJPY (129.41) tested 130.20 yesterday but fell back sharply from there contrary to our expectation of a further rise towards 131 and higher. While below 130.70, we may expect a range of 130.70-129/128.50 to hold. Broad range of 128/128.50-130.50/70 may hold for the next 1-2 weeks
Dollar-Yen (109.62) fell sharply from 110.20 testing our mentioned support at 109.60. If the pair breaks lower, it can fall further towards 109.40/20-109.00. Immediate view is bearish within the broad range of 110.40-109.20/00
Aussie (0.7316) fell sharply to test 0.73 before bouncing slightly from there. While above 0.73, a rise to 0.7350 cannot be negated but the currency may soon break below 0.73 to head downwards.
Pound (1.3797) fell sharply from levels above 1.39 and could be headed towards 1.3750-1.3700 in the coming sessions. View is bearish.
USDCNY (6.4435) tested 6.4350 falling sharply from 6.45 yesterday. The pair has risen slightly from 6.4350 but may not sustain for long. An eventual fall to 6.40/3750 could be on the cards in the next 1-2 weeks.
USDINR (73.6825) is likely to dip towards 73.50/40 initially before again bouncing back to higher levels of 73.65/80. Immediate view is bearish while below resistance at 73.80.
INTEREST RATES
The US Treasury yields have dipped across tenors after the US inflation data release yesterday showed a slowed down in the pace of rise. The US Headline CPI rose 5.2% (YoY) in August compared to 5.28% in July. A further fall in the yields from current levels will negate our view of seeing a rise and in turn can drag it lower in the coming days. The German yields have dipped slightly but still have room on the upside to test their resistances before seeing a strong reversal. The 5Yr and 10Yr GoI have risen back well from their day’s low and can move up further if they manage to break above their key immediate resistance.
The US 2Yr (0.20%), 5Yr (0.78%), 10Yr (1.28%) and the 30Yr (1.86%) Treasury yields have come down across tenors. A further fall from here can drag the 10Yr lower to the 1.2%-1.18% support zone. It will also negate the chances of seeing 1.45%-1.5% that we had been mentioning. While below 1.9%, our earlier view of seeing 2%-2.1% may not happen and in turn a fall to 1.8% is possible.
The German 2Yr (-0.71), 5Yr (-0.65%), 10Yr (-0.34%) and 30Yr (0.15%) yields have dipped slightly. We retain our view of the current corrective rally extending upto -0.30%/-0.25% (10Yr) and 0.20% (30Yr) in the coming days. Thereafter a reversal to resume the broader downtrend is possible.
The Indian 10Yr GoI (6.1982%)has risen back well from the day’s low of 6.1741% yesterday. A break above 6.2% will be bullish to test 6.22%-6.24% on the upside and will negate our earlier view of seeing a fall to 6.1%.
The 5Yr GoI (5.6363%) on the other hand can rise to 5.66%-5.68% on a break above the immediate resistance level of 5.64%. That in turn will prove our view of seeing a fall to 5.55%-5.5%.
