STOCKS
The pattern of a day of bounce and a subsequent day of sell-off continues in the Dow. While there is room on the downside indices like the Dow, Shanghai, Sensex and Nifty have key supports coming up. DAX and Nikkei are already hovering above their key supports and managing to hold above them. Our bias is inclined for these supports to hold and see some recovery in equities. However, we will be watching the movement closely over the next few days to see if these supports can hold at this turbulent time.
Dow (19898.92, −1338.46, -6.30%) has failed to sustain the bounce seen on Tuesday and has tumbled below 20800. The chances of seeing a test of 18500-18000 is still alive. However, we will be looking for a strong bounce from the 18500-18000 region. While 18000 holds, the chances of revisiting 21000 levels cannot be ruled out.
DAX (8441.71, −497.39, -5.56%) seems to lack strength for a strong bounce although it is managing to hold above the 8400-8200 support zone. It has to sustain above 8200 in order to avoid a further fall to 7000 and even lower levels. We will have to wait and watch. As mentioned yesterday, a rise past 9200 is needed to stage a strong rise to 9800-10000 again.
Nikkei (16602.26, −124.29, -0.74%) is hovering around the crucial support level of 16500 and will need a close watch. A break below it will see the current fall extending to 15500-15000. At the same time, as mentioned yesterday while it manages to hold above 16500, a strong rise past 17500 is required to take the Nikkei further higher to 18000 levels and ease the downside pressure.
Shanghai (2656.91, −73.85, -2.71%) has broken the 2700-3150 range on the downside. The chances of seeing the rise to 2900 stands negated now. While below 2675, the outlook is bearish and a fall to 2600 and even 2560 looks likely now. Thereafter the index can bounce again.
Sensex (28869.51, -1709.58, -5.59%) has tumbled below 30000. Though there is room to test 27500-27000. However, we expect the Sensex to stage a strong recovery from this 27500-27000 region and we will approach the market from the long side rather than becoming more panic.
Nifty (8468.80, -498.25, -5.56%) has declined sharply below 9000 and is now likely test 8000 on the downside. . We see 8000 as a strong support from where a bounce is possible. We will watch the price action around 8000 closely today.
$-Nifty (113.93) – Nifty in Dollar terms, is coming closer to its crucial long-term support level of 110 from where it can bounce-back sharply. This indicates that the downside in the Nifty could be limited to 8000 for now. We will have to wait and watch.
COMMODITIES
Pressure on crude prices continues as COVID19 concerns are forcing more countries to go into lockdown and demand for oil likely to take a serious toll. With surplus of production from US, Russia and Saudi Arabia, crude continues to trade lower. Watch price action near $23 and $20 respectively for Brent and WTI. Gold is headed towards support near 1450 which needs a watch too as a break or bounce from there would be the driver of next movement in the coming weeks. Silver and Copper also trade lower.
Although we look at important supports below current levels on Crude and Gold, Silver and Copper have broken sharply below support levels. With markets being highly volatile on impact of COVID19, we may not participate in the current bearishness of the markets as the current market situation may or may not take prices further down. We would wait to see any reversal signals for any confirmation of a bounce back. For now we wait and watch.
Brent (25.82) and Nymex WTI (22.54) have fallen sharply towards our mentioned $25-23 and $20 respectively. Our expected low of $23 and $20 on Brent and WTI respectively will need a close watch for any reversal signal from here. Failure to do so will make prices vulnerable to sharp fall below $20 levels which is not preferred just now. Watch price action near current levels to look for any reversal signal.
Gold (1484.00) has fallen back below 1500, unable to sustain higher levels seen yesterday. Crucial support is seen at 1450 just now and only a break below that would set in a bearish tone for the near to medium term with possibility of falling further towards 1400-1380 levels. Watch price action near 1450.
Silver (11.99) is trying to break below $12 and if that sustains, we may expect further fall towards $9 in the coming weeks. We would be cautious on silver below $12.
Copper (2.0345) seems to be in a free fall on a break below long term support at 2.35. Levels near 2.0 could be an important support to watch. We would be on a look out for reversal signals around current levels.
FOREX
Hugh volatility in currency markets take exchange rates sharply beyond resistance and support levels as we may fail to track possible bottoms or tops for the near term. At such phase, we may choose to simply wait and watch rather than act in panic. Dollar Index has broken above resistance at 100 and dragged Euro sharply down to levels below 1.09. Dollar Yen has risen sharply to 109+ levels and could move up further. Aussie and Pound look strongly bearish with no indication of any possible reversal. Rupee could weaken further today as NDF rates quote higher in pre-OTC opening session. Yuan trades weak too.
Asian Dollar Index (ADXY, 100.65) has broken below long term support at 102. We would watch if the fall continues to take it lower towards 98-97 region in the near term. This could be very crucial to watch in the coming sessions.
Dollar Index (101.47) has risen sharply breaking above resistance near 100-101. While the rise sustains, it could continue to move higher towards 102-104 in the medium term. A fall back below 100 would be needed to negate further upside.
Euro (1.0886) has fallen sharply and could re-test supports near 1.08-1.0750. We would have to wait and watch for further directional clarity.
Dollar-Yen (109.20) has risen past 109 and could be headed towards 110 or higher in the near term if the rise sustains. Watch price action above 109.
EURJPY (118.81) has moved up and could test 120.50 before falling again from there. Broad range of 120.50-116 remains intact for now.
Aussie (0.5534) has come down as expected. Failure to bounce from 0.55 could make it more vulnerable to a fall towards 0.55. Aussie looks strongly bearish just now. Watch price action near 0.55.
Pound (1.1476) has broken sharply below 1.20 mentioned yesterday. We would be on wait and watch mode as important supports on technical charts fail to hold at such high volatile situation globally.
USDCNY (7.0733) has sharply broken above 7.03. 7.10-7.12 could be tested if the rise continues.
USDINR (74.2650) has been trading in the 73.80-74.50 range and could try to attempt a break of upper limit of 74.50 despite possible intervention from the RBI. A break above 74.50, if seen could take it higher towards 74.75-75.00-75.50. Prices on NDF are already quoting at 75. We may see a weaker Rupee on the OTC today.
INTEREST RATES
More stimulus announcements to ease the market pressure. Now the European Central Banks joins the lot with a 750 billion Euro Pandemic Emergency Purchase Programme. Both the US and German Yields have risen sharply. The German yields look bullish in the short-term and can move up further. Though the Treasury yields also have room to move up are coming closer to their crucial resistances which will need a close watch. The 10Yr GoI looks mixed and can trade in a sideways range for some time with chances of moving higher first before resuming its overall downtrend.
The US 2Yr (0.51%), 5Yr (0.79%), 10Yr (1.23%) and 30Yr (1.81%) yields have risen further in line with our expectation, indeed much faster that we had anticipated. The 10Yr has come inside its crucial 1.2%-1.3% resistance zone which will need a close watch in the coming days. We will have to see if it can breach this resistance zone or not. The 30Yr has risen past 1.7% and can now test 1.9%-2%. Inability to breach 2% can drag it lower again.
The German 2Yr (-0.80%), 5Yr (-0.51%), 10Yr (-0.25%) and 30Yr (0.07%) yields have risen sharply across tenors and are keeping our bullish view intact. The 10Yr has risen beyond -0.30% and can now test -0.20% which is a crucial level to watch. A strong close above -0.20% will be very bullish. The 30Yr has risen back into the positive territory and can move further higher to 0.18% while it sustains above 0%.
As expected, the 10Yr GoI (6.2958%) moved up towards 6.35% yesterday and has closed on a mixed note. It can oscillate between 6.20% and 6.35% for some time with high chances of the upside extending up to 6.40%-6.45% while it sustains above 6.20%. However, we expect the upside to be capped at 6.45% and the yield is likely to come down eventually.
