STOCKS
Asian indices are getting a strong follow-through rally after a strong bounce yesterday. Dow which failed to cheer the Fed’s move on Monday has risen sharply after the news that the US government is getting closer to announce a $2 trillion stimulus. It will have to be seen if the Dow can sustain the bounce or not. Nikkei, Shanghai and DAX have room to rise further in the near-term which would strengthen the case for a reversal. Sensex and Nifty, though have closed higher looks mixed on the charts. They will have to breach their key resistances to boost the sentiment. We will have to wait and see if they can take cues from strong rise in other markets or the lock down announced by the Prime Minister yesterday is going to have a negative impact.
A strong bounce and a decisive close above 20000 has been seen on the Dow (20704.91, +2112.98, +11.37%) yesterday. It will now have to be seen if this bounce can sustain or not. A strong close above 21500 this week will be a good to see further rally for the rest of the month which will also negate the chances of testing 18000-17900 support zone. We will have to wait and see.
As expected, DAX (9700.57, +959.42, +10.98%) has risen sharply breaking above 9200. It can now test 9800-10000 in the near-term in line with our expectation. A break above 10000 can take it further higher to 10200-10400.
Nikkei (19129.21, +1036.86, +5.73%) has risen further breaking above the resistance level of 18500. As mentioned yesterday, the break above 18500 has now opened doors to test 19800-20000, a crucial resistance zone to watch now which will be deciding whether the current bounce can continue or not. A strong break above 20000 will be bullish to see further rally in the coming weeks.
Shanghai (2773.05, +50.62, +1.86%) has risen breaking above 2750. A strong close above 2750 this week will be bullish to revisit 3000-3100 levels again going forward. The chances of seeing 2600 on the downside stands negated while the index sustains above 2700.
Nifty (7801.05, +190.80, +2.51%) has closed slightly higher but looks mixed on the charts. A strong bounce taking cues form the global markets could ease the downside pressure. However, Nifty has to surpass 8400 decisively in order to completely negate the chances of seeing 7000 and 6500-6350 on the downside. We will have to wait and watch today.
Similarly, Sensex (26674.03, +692.79, +2.67%) will have to rise past 30000 decisively to signal a reversal and also to negate the chances of seeing a fall to 24000 that we had mentioned yesterday.
COMMODITIES
Commodities trade higher today. Gold has risen the most but will have to see if it manages to break above 1700 in the near term. Silver, Copper and Crude prices trade higher too but while Copper and Silver could rise further in the near term, Crude could spend some time in a sideways consolidation.
Brent (27.89) and Nymex WTI (24.74) have risen slightly but are stable below $30. Although we may not expect a further fall from here to see fresh lows, the prices could spend some time in a sideways consolidation below $30. Only a sustained break above 30 would indicate a bullish signal for the medium term.
Gold (1666.10) has moved up sharply as support near 1450 holds well. A re-test of 1700 is on the cards but it would be crucial to watch if Gold moves above 1700 to test 1800-1900 in the medium term.
Silver (14.43) has risen as well and could be bullish towards 16 while above 14.
Copper (2.1780) trades higher like other commodities but will have to see a sustained upmove breaking above 2.35/40 to set a bullish tone for the medium term.
FOREX
After the FED announced reducing interest rates to zero last week, it has come up with yet another announcement of bringing in an estimated $300 bln into funding that would be used to a) buy bonds and extend loans under a mechanism by the Primary Market Corporate Credit Facility, b)buy debt already acquired and c) to provide loans to small businesses and households under the Term Asset-Backed Securities Loan facility (initially created during the 2008 crisis).
Following the announcement from the FED, Dollar Index (101.48) dropped to test 101.05 before rising back from there. As we have been mentioning, resistance at 103 is crucial and a fall from there is expected keeping bearish view for the index intact while below 103.
Euro (1.0813) looks bullish while above 1.06-1.07 and could gradually move higher towards 1.09-1.10 in the near term.
Dollar-Yen (110.92) is steadily moving up and is potentially bullish towards 112 on the upside.
EURJPY (119.95) has moved up as expected and could now rise towards 120-121 as mentioned yesterday. View is bullish while above 118.
Aussie (0.5977) is trying to rise above 0.60 and such a sustained rise is needed to keep the exchange rate higher and brings on hopes of bullish possibility.
Pound (1.1802) is rising towards 1.20. But we would see if the exchange rate faces rejection from 1.20 or moves up beyond to indicate a possible reversal.
USDCNY (7.0681) needs to be watched closely. Only if the pair moves down below 7.04/03 towards 6.95/90 again, there could be some sense of relief, else a re-test of 7.12/15 or higher could indicate some more disappointment in the Asian currencies broadly
USDINR (75.89) closed at 75.89 yesterday keeping below our expected 76.50 resistance. The 21-day nation lockdown announced by the Prime Minister yesterday has started and it would be interesting to see how the markets take it today. While Indian currency market is closed today for Gudi Padwa, we may follow the movement in the equity markets today to understand the market sentiment just now. A positive gesture by the investors could pull back Nifty and Sensex, giving some hope for a fall in USDINR in the near term. For now we expect 76.50 to hold as crucial resistance but at the same time cannot negate a further rise towards 77-78 in case of any unforeseen circumstances.
INTEREST RATES
The US government getting closer on striking a deal to announce a $2 trillion stimulus package has given some relief for the US Treasury yields. However, the bounce seen yesterday is likely to be short-lived and the Treasury yields are likely to reverse lower again going forward. The German yields have also bounced yesterday and could negate the possible fall that we had mentioned yesterday if they manage to sustain this bounce. The 10Yr GoI can remain range bound in the short-term. The Indian markets are closed today on account of a public holiday.
The US 2Yr (0.33%), 5Yr (0.51%), 10Yr (0.85%) and 30Yr (1.42%) Treasury yields have risen back across tenors. . We expect this bounce-back move to be short-lived. The 10Yr has resistances at 0.9%, 1% and a slightly wider one at 1.2% that can restrict the upside. The 30Yr has resistances at 1.65%-1.70%. While the bounce sustains a test of these above mentioned resistances can be tested before we see an eventual reversal in the treasury yields.
The German 2Yr (-0.67%), 5Yr (-0.52%), 10Yr (-0.33%) and 30Yr (0.04%) yields have risen back across tenors. The 30Yr has risen back above 0% and keeps alive the chances of testing 0.20% on the upside. While above 0% the chances of seeing a fall to -0.20% on the downside that we had mentioned yesterday will get negated. The 10Yr has resistance at current levels which will have to broken in order to take it further higher to -0.20%. We will have to wait and watch.
The 10Yr GoI (6.3042%) remained stable in the range of 6.28%-6.36% yesterday and has closed on mixed note. The Indian markets are closed today on account of a public holiday.
