STOCKS
Globally all equity indices fell sharply on Friday but is likely to recover a bit today as the fears of the new Covid variant seems to subside a bit. We may expect a short corrective move today but will need a close watch over the next few session to see if the bounce would sustain or give way to further bearishness in the coming days.
Dow (34899.34, -905.04, -2.53%) plunged due to news of new covid variant and concerns about its possible impact on the economy. A small corrective upmove can be seen today.
DAX (15257.04, -660.94, -4.15%) had fallen sharply too and has room to fall further towards 15200/15100 before we see a rise again.
Nikkei (28746.49,5.13, -0.018%) opened lower at 28335.61 and is now slowly rising up. Nikkei has to rise past 29000-29500 for the view to be bullish again. While below 29000, the danger of seeing a fall to 28000 cannot be negated.
Shanghai (3559.59, -4.50, -0.13%) has fasllen but is still trading above the crucial support at 3550. A bounce from the support can take the index up towards 3600. If the index falls below 3550, then a test of 3500 is possible in the coming sessions.
Nifty (17026.45, -509.80, -2.91%) fell sharply on Friday. The index managed to close above the crucial support at 17000 which can produce a bounce towards 17200/400 now. Failure to sustain above 17000 will make it vulnerable to medium term bearishness.
Sensex (57107.15, -1687.94, -2.87%) also fell sharply on Friday. The index has support at 57000 which if holds can produce a short bounce. Resistances can be seen at 58000/59000 above current levels.
COMMODITIES
Sharp fall was seen in commodities on Friday on fears of new variant of Covid likely to spread fast. But some recovery is seen today as prices bounce back from the last week’s lows. Brent and WTI need to hold above 70 and 68/67 respectively to keep the bullish momentum intact. Gold needs to break on either side of the 1780-1820 region to decide on further direction. Silver has support at 23 and 22 which may hold to produce an eventual bounce towards 24/25 in the medium term. Similarly, Copper also has supports at 4.25 and 4 from where a bounce looks possible towards 4.35/40.
News of new Covid variant on Friday sent Brent (75.92) down as market concerned about the demand in the coming weeks as prices fell in line but much faster than expected, breaking below 78/77. If 70 holds, we may expect a bounce back towards 80-82/83 in the near term else a break below 70 would indicate further bearishness for this week at least.
WTI (71.42) broke below our mentioned 75 to test 67.42 on the downside on Friday. Though we see a slight bounce today, we need to see if the bounce would sustain and take the prices higher or not.
Gold (1794.30) rose sharply from immediate support at 1780 to test 1817 but could not sustain and fell back to close at 1791. We need to see if Gold rises back to 1820 and breaks higher towards 1840 or falls back to break below 1780. Till then a ranged movement within 1780-1820 looks possible.
Silver (23.40) tested immediate support at 23 and if it breaks it can test more important support at 22 before bouncing back to higher levels of 24-25 again.
Copper (4.3540) has important support at 4.25 and can bounce back if the support holds. In case the price breaks below 4.25 (less likely), it can fall to 4 before reversing from there.
FOREX
Currencies have recovered from sharp decline seen on Friday. We need to see if the correction holds or we continue to see bearishness in the medium term. Dollar Index may rise higher again if it breaks above 96.5 and sustains higher in the near term. Euro needs to sustain above support at 1.12 to rise to 1.14/1.1450 before reversing again from there. EURJPY, Aussie and Pound can fall from current levels. USDCNY continues to be ranged within 6.39-4.37. USDINR holds above support at 74.60. We need to see if 75 or higher is tested in the near term.
Dollar Index (96.26) fell to 95.75 on Friday but has bounced back well and trades above 96 again today. While above 95.75/70, there is scope for a rise towards 97.50-98 on the upside but we need to see if the index attempts to test 96.50 or lower before rising higher from current levels. Watch price action to see if the index moves up again above 96.50 and sustains.
Euro (1.1277) rose to 1.13308 before falling off slightly from there. We may expect 1.12 to hold as a decent support just now and produce a bounce towards 1.14-1.1450 before falling from there to 1.12 or lower in the medium term.
EURJPY (128.10) has fallen sharply to re-test support at 128. A fall below 128 if seen could make it vulnerable to a sharp fall towards 126-125/124 on the downside. Watch price action at 128.
Aussie (0.7143) has bounced after testing 0.71. The Aussie can rise to 0.7250/75 on the upside before reversing from there in the medium term.
Pound (1.3333) may hold above 1.33 and see a corrective bounce to 1.34-1.3450 before a fall is again seen in the longer run back to 1.33 or lower. For now watch price action near 1.33.
Dollar-Yen (113.53) is holding above 113 for now and we need to see if t bounce sustains to take the index higher to 114 and above or falls below 113 to head towards 112/111 on the downside.
USDCNY (6.3847) continues to remain within 6.40/39-6.37 range mentioned last week. A break above 6.40, if seen can take the pair up to 6.42 else sideways consolidations could continue between 6.40/39 and 6.37.
{USDINR (74.8750) close at 74.8750 on Friday but the NDF rates shows 75.08 just now. We need to see if the spot opens and rises to 75 and higher or falls back towards 74.80/70. Note that 74.60 is now an important support below current levels.
INTEREST RATES
The US Treasury yields had declined sharply on Friday across tenors. The renewed fear in the markets on the new covid-19 variant has dragged the yields along with the equities. The Treasury yields have room to fall within the expected broad range. The German yields have also reversed sharply lower. The resistances have held very well as expected and a fresh fall is possible from here. The 10Yr and 5Yr GoI have come down and can see further downticks in the coming days.
The US 2Yr (0.55%), 5Yr (1.24%), 10Yr (1.54%) and the 30Yr (1.88%) have come down further sharply on Friday. The 10Yr has declined below 1.6% and can now test 1.5%-1.45% in line with our expectation. The 30Yr has already fallen into the 1.9%-1.85% region much faster than expected. It will have to be seen if it is bouncing back from 1.85% or extending the fall up to 1.75%. As mentioned on Friday, we expect the yields to be in the range of 1.45%-1.65% (narrow) / 1.35%-1.75% (broad) on the 10Yr and 1.75%-2.1%/2.2% on the 30Yr.
The German 2Yr (-0.78%), 5Yr (-0.65%), 10Yr (-0.34%) and 30Yr (0.01%) yields have declined further on Friday. This keeps our view of seeing a reversal and a fresh fall to -0.45% / -0.5% (10Yr) and -0.1% / -0.2% (30Yr). A strong rise past -0.2% (10Yr) and 0.10% (30Yr) is needed to negate the bearish view and in turn take the yields up to -0.1% (10Yr) and 0.2% (30Yr).
The Indian 10Yr GoI (6.3304%) has dipped and tested the 6.34%-6.32% region on Friday as expected. We reiterate that 6.3%-6.38% is the narrow range of trade for now and 6.3%-6.45% is a broad trading range (in case if 6.38% is broken). The bias remains bearish to break 6.3% and see a fall to 6.2% eventually.
The 5Yr GoI (5.6568%) has broken the 5.66%-5.75%/5.78 range on the downside as expected. While this break sustains, a further fall to 5.62%-5.61% is likely in the coming days.
