A strong surge in the US and European equity markets yesterday. While increasing hopes for a Brexit deal has pushed the DAX higher, strong earnings has aided the Dow to surge yesterday. Broadly the Dow, DAX, Nikkei and Shanghai remains bullish. On the domestic front, the Sensex and Nifty have also risen above their key resistances and can move further higher in tandem with the global indices.
Dow (27024.80, +237.44, +0.89%) is moving up in line with our expectation. The bullish view remains intact to test 27250-27300 and even 27500 in the coming days.
DAX (12629.79, +143.23, +1.15%) has risen well above 12400. It can surge to 13000 and 13200 in the coming days. Supports are at 12500 and 12430. From a long-term perspective the current move may have the potential to test even much higher levels of 14000 on the upside while above 12000.
As expected Nikkei (22532.62, +325.41, +1.47%) has moved further higher and keeps the bullish view intact. It can test 22700 and even 23000 in the coming days. Support is at 22250.
Shanghai (2993.84, +2.80, +0.09%) is struggling to see a strong follow-through move above 3000. But as long as it sustains above 2975, the bullish outlook will remain intact to test 3050. It will be crucial to see if Shanghai is managing to surge past 3050 or not going forward.
Nifty (11428.30, +87.15, +0.77%) has risen and closed above 11400 yesterday. The outlook is now bullish to see a rise to 11600 in the short-term while the Nifty remains above 11400.
Sensex (38506.09, +291.62 +0.76%) broke above 38500 but has come-off from the high of 38635.19. However, the bias is bullish for it to test 39000-39250 on the upside. Supports are at 38400 and 38345-38330 region.
Commodities look bearish for the near term. Brent and WTI have already dipped and could test support levels while Gold, Silver and Copper has more room to fall in the near term.
Brent (58.95) and WTI (52.98) have fallen sharply to re-test upports near 58 and 51 respectively. We may expect the supports to hold and produce a bounce soon. Immediate view is bearish but the prices could soon see a bounce.
Gold (1486.70) looks bearish in the near term towards 1460/50. Silver (17.46) has also come off from 17.70 seen yesterday. We may expect a test of 17 on the downside in the next few sessions.
Copper (2.6045) has dipped in line with expectations and could be headed towards 2.55 in the near term. View is bullish while below 2.65.
Overall currencies are mixed. Dollar Index could have some more room on the downside while Dollar Yen looks bullish in the medium term. High volatility is seen in Pound on talks between EU and UK for closing on a Brexit deal. Aussie is sideways and Dollar-Rupee looks strongly bullish.
Dollar Index (98.33) has dipped and could fall to test 98.00-97.75 in the near term. A bounce from there could be seen taking the index back towards 98.50/75.
Euro (1.1028) is stable holding below 1.1050 but has immediate support at 1.10-1.0975 which if holds could gradually push Euro towards 1.11.
Dollar-Yen (108.68) has important near term resistance at 109 which has the potential to push the currency pair back towards 108. However, on the weekly charts, there is scope of rise towards 110 before Dollar-Yen could fall. Near term is bullish for Dollar-Yen but watch for a short rejection at 109.
EUR-JPY (119.87) has dipped from 120.23 and while that holds, EURJPY could dip towards 119.00-118.80 before it bounces back towards 120-121 in the longer term.
Aussie (0.6735) could get some support at 0.67 from where a bounce back to 0.68 looks possible. For the near term we may expect a range trade within 0.67-0.68.
Pound (1.2751) has moved back to trade above 1.27 after seeing a short dip yesterday as reports from sources on Bloomberg states that the UK and EU are closing on a draft Brexit deal. However, an official announcement is still awaited. We would watch immediate resistance near 1.2780 as seen on the 3-day candles.
The USDCNY (7.0944) has risen sharply holding above support near 7.04/05. The pair looks bullish just now and could rise to target higher levels of 7.15.
Dollar-Rupee (71.55) rose sharply to close above 71.50 yesterday. 71.65 is an intermediate resistance on the upside from where a decent dip towards 71.50-71.30 could be possible. But if the rising momentum continues to hold strong, it could pull up Dollar-Rupee towards 72 in the near term. USDINR looks strongly bullish.
The rally in equities keeps the bonds under pressure. As a result both the US Treasury and the German yields have moved higher on the back of high risk aversion in the market. Increasing hopes to reach a Brexit deal is also weighing on the bond market. The near-outlook remains positive and the yields can move further higher in the coming days. The 10Yr (07.26 GS 2029) GOI can dip before reversing higher.
The US 2Yr (1.60%), 5Yr (1.57%), 10Yr (1.75%) and 30Yr (2.23%) have surged across tenors. The 10Yr has tested 1.75% and the 30Yr is heading towards 2.25% in line with our expectation. It will have to be seen if the 10Yr can rise past 1.75% and the 30Yr can breach 2.25% or not. A break above these hurdles will be bullish to see further rise towards 1.85%-1.95% on the 10Yr and 2.35%-2.37% on the 30Yr in the short term.
The German 2Yr (-0.70%), 5Yr (-0.66%), 10Yr (-0.42%) and 30Yr (0.11%) have moved up in line with our expectation. The bullish outlook remains intact. As mentioned yesterday, the 10Yr can rise to -0.33% and even higher on a break above -0.40% while the 30Yr can test 0.30% on a strong break above 0.20%.
As expected, the 10Yr (07.26 GS 2029) GOI (6.6668%) has dipped yesterday and can test 6.62% on the downside from where a bounce to 6.70% and 6.75% is possible again.
On the other hand, the Indian 10Yr (06.45 GS 2029) GoI has moved slightly higher yesterday to close at 6.4937% as compared to 6.4841% on Monday.