STOCKS
The fear of corona virus spreading continues to weigh on the market sentiment and keeps the market highly risk averse. Dow has tumbled giving back the gains made on Wednesday and remains bearish for further fall. DAX has failed to rise past its key resistance and is in danger of seeing a fresh fall. Nikkei has declined below its key support that we had expected to hold and is now under pressure for further fall. Shanghai looks relatively better among the lot but need to see if it can sustain above its immediate support. Sensex and Nifty are holding above their key supports but may come under pressure after the moratorium imposed on YES Bank yesterday. SGX Nifty (10846.50, -86.25, -0.79%) is trading lower. Sensex and Nifty will need a close watch today.
Dow (26121.28, −969.58, -3.58%) has come-off again failing to sustain above 27000. The broader bearish view is still intact. A fall to 25000-24350 is possible while the index remains below its crucial resistance levels of 27000 and 28000. As we had mentioned earlier, a strong rise past 28000 is very much needed to turn the outlook positive which looks unlikely at the moment.
Contrary to our expectation, DAX (11944.72, −182.97, -1.51%) has come-off failing to breach 12200. While below 12200, the index looks vulnerable to test 11600-11500 on a break below 11800. It will also keep the possibilities alive of seeing 11000 on the downside over the medium-term.
Nikkei (20681.42, −647.70, -3.04%) has declined below the crucial support level of 20800 which we had expected to hold. The danger has now increased to see a further fall towards 19500 in the coming days. A strong rise past 21200 is needed to negate this fall. But that looks less probable.
Shanghai (3040.07, −31.61, -1.03%) has come-off from yesterday’s high of 3075. An immediate support is at 3025 a break below which will take the index lower to 2975 again. Such a break will also delay our preferred rise to 3100
Sensex (38470.61, +61.13, +0.16%) and Nifty (11269, +18, +0.16%) are retaining their 37800-39100 and 11000-11400 range respectively as expected but might come under pressure following the moratorium imposed on YES Bank yesterday. However, on Sensex as we had mentioned earlier 37500-37200 is a strong support below 37800 which can limit the downside in case of a break below 37800. On Nifty we will be watching closely the crucial support level of 11000 as a strong break below it will pave way for 10600-10500.
COMMODITIES
After the first day of the OPEC group meeting, it has proposed to take off 1.5mln barrels a day off the market as the coronavirus breakout curbs demand but is yet to get a “YES” from Russia and others. While the proposed cut is significantly higher than what the Analysts had expected, Crude prices fell sharply contrary to our expectation of a further rise from levels seen in the last 2-3 sessions. The second day of the meeting is due today and markets would be on a look out for further news from the OPEC. Gold and Silver have risen sharply as investors might now be turning towards safe haven asset classes as US equities decline sharply. Copper may attempt to rise too in the near term.
Brent (49.56) and WTI (45.53) have fallen sharply with Brent breaking below the important support at 50. Brent could test $44-45 in the near term before bouncing back from there. A further decline below $44 would indicate continuation of the falling crude prices for some more weeks. WTI on the other hand could be limited to $42 on the downside but has interim support near $44 just now.
Gold (1671) has risen sharply as US equities sank indicating that the investors have possibly turned back to Gold as safe haven asset. The rice has broken above our mentioned 1660 yesterday and looks bullish for the near term with an initial target of 1700.
Silver (17.33) has bounced well from 16.5 and while that holds, near term is bullish towards 18.5.
Copper (2.5635) continues to trade in the 2.65-2.52 region with a possible test of 2.65 to be seen in the next few sessions. A break above 2.65 is needed to take it up further and set a bullish tone for the medium term. Till then we would watch price action near 2.65.
FOREX
High volatility in the currency markets today with the Dollar Index falling below 97 and pulling up Euro above crucial resistance at 1.12. Dollar Yen breaks crucial support at 106; lower support now seen at 104. Pound trades higher and Aussie has dipped from levels seen yesterday. Yuan is weak and Rupee is expected to weaken too today.
Dollar Index (96.58) has fallen below 97 and looks further bearish towards 95 in the near term. The fall in the index has pulled up Euro (1.1232) to levels above crucial resistance at 1.12 and if the rise sustains, we may expect a rally towards 1.13-1.14 in the next couple of weeks.
Dollar-Yen (105.87) trades below crucial support at 106 and while that sustains, we may expect a further fall towards 104 in the medium term. The bearish view could be negated only on an immediate bounce from current levels, if seen in early sessions of next week.
EURJPY (118.97) has fallen below 119 to head towards the lower end of our mentioned range of 121.50-118. A break below 118-117.50 is needed to make the cross further bearish in the longer run, else a bounce from 118 could take it back to 120-121 levels in the near term.
Aussie (0.6580) has dipped again to levels below 0.66 and has scope for a fall back towards 0.65 in the near term.
Pound (1.2956) has moved up and could target 1.30/32 in the medium term. Bullish view remains intact while Pound trades above 1.28.
USDCNY (6.9537) has moved up as expected and if the rise sustains, we may expect a test of 6.98/7.00 in the near term. Downside is likely to be limited to 6.90 for now.
USDINR (73.32) tested 73.04 yesterday as a corrective decline from levels of 73.65 seen the day before. The correction is likely to have ended yesterday with a possible gap up opening to be seen today that could be followed up with a sharp rise towards our mentioned targets of 73.88-74.15/20. We would look for a rally in Dollar-Rupee today especially after the sharp fall in crude prices (refer to commodities section above) that currently has negative directional correlation with the Dollar-Rupee. Further fall in crude prices would be negative for the Rupee.
INTEREST RATES
Risk aversion is continuing to weigh high on the market as the fear of the corona virus attack seems not to be abating. The US Treasury yields have tumbled again after an intermediate bounce on Wednesday. Market is expecting another 50bps rate cut from the Fed. The outlook remains bearish and there is room to fall further. The German yields are coming down in line with our expectation and keep our bearish view intact. The 10Yr GoI might consolidate above its key support in the near-term before resuming its downtrend.
The US 2Yr (0.51%), 5Yr (0.60%), 10Yr (0.84%) and 30Yr (1.46%) Treasury yields failed to sustain the bounce seen on Wednesday and have tumbled again yesterday thereby negating the chances of an intermediate bounces that was mentioned yesterday. As we had mentioned earlier this week, the 10Yr can test 0.60% – an important support which needs to hold in order to avoid a further fall. The 30Yr on the other hand has declined below 1.50% and has room to fall towards 1.20% and 1.15% in the coming days.
The German 2Yr (-0.87%) and 5Yr (-0.87%) yields have dipped slightly while those at the far end, the 10Yr (-0. 69%) and 30Yr (-0.22%) have declined a little deeper yesterday. Our bearish view remains intact. The 10Yr can test -0.80% and -0.83% on the downside. The 30Yr has declined below -0.20% as expected and is likely to head further down towards -0.30% in line with our expectation.
The 10Yr GoI (6.2394%) is likely to oscillate between its support in the 6.20%-6.19% region and resistance at 6.27% in the near-term. A breakout on either side will then decide the next move. The broader view remains bearish and we expect the 10Yr GoI to break below 6.10% eventually.
