Yesterday we had mentioned that the equities will need a close watch to see if they are going to regain strength and move up or will run into a sideways consolidation. The latter is what seems to be happening now. Dow, Nikkei, DAX and Shanghai are stuck in a narrow range over the last few days. For now the bias is inclined towards the positive side to see these indices (Dow, DAX, Shanghai and Nikkei) break their current range on the upside and move higher. We will have to wait and see. Sensex and Nifty may have room to dip in the near-term and then bounce-back to possibly trade sideways going forward.
Dow (22327.48, +690.70, +3.19%) is managing to hold well above 21500 – a key level that we had mentioned that will need a close watch. A strong rise past 23600 will pave way for our preferred targets of 23000 and 24000 eventually. Also as mentioned yesterday, a strong close above 21000 today (for March) will reduce the chances of a fresh leg of fall to 19000 again. For now the bias remains positive from the charts.
DAX (9815.97, +183.45, +1.90%) dipped below 9500 but has risen-back immediately. This keeps the 9500-10150 range intact. The bounce from the low of 9453.79 yesterday leaves the bias positive. A rise to 10000-10150 (the upper end of the range) can be seen in the near-term. We expect the DAX to break this range above 10150 and rise to 10400-10500 in the coming days.
Nikkei (19233.50, +148.53, -0.78%) continues to oscillate between 18500 and 19500. As mentioned yesterday, our bias is bullish and we expect the Nikkei to break this range above 19500 and rise to 19800-20000 in the coming days.
Shanghai (2762.97, +15.75, +0.57%) has bounced back above 2750 thereby reducing the chances of seeing 2700-2680 on the downside that we had mentioned yesterday. The near-term outlook is mixed. As mentioned yesterday, on the 3-day chart, there is a possible range of 2650 – 2815 which can remain in place for some time. Broadly, we expect Shanghai to break this range above 2815 eventually and rise to 3000-3100 again.
As expected Nifty (8281.10, -379.15, -4.38%) fell yesterday well beyond our expected level of 8400 (mentioned in the Morning Briefing yesterday). It can now head towards 8000. We expect the Nifty to consolidate between 8000 and 9000 for some time. However, the chances of seeing a break below 8000 and a fall to 7800-7600 again will have to be gauged.
Sensex (28440.32, -1375.27, -4.61%) has come down further and is heading towards 28000 in line with our expectation. It will have to be seen if it can reverse higher again from the 28000-27700 region or not. In ability to bounce from this 28000-27700 region can drag it to 27000.
Recovery seen in crude prices but we may expect some range trade in the near term. Gold and Silver may remain in a sideways range with possibility to test lower support levels. Copper has risen and could test immediate resistance above current levels. But a sharp rise is needed breaking above the interim resistance to turn further bullish.
Brent (27.37) and Nymex WTI (21.61) have recovered a bit with Brent recovering more than the rise seen in WTI. A break above $30 and $26 on Brent and WTI respectively is needed or crude prices to turn bullish in the medium term. While below the mentioned levels, we may not negate another dip in the next few sessions.
Gold (1641) is likely to hold above its interim support at 1620 and rise towards 1700-1720 in the near term. A fall below 1620 could take it to lower support near 1590 but overall price action could be bullish for now. We do not see a fall below 1590.
Silver (14.31) could remain in a small sideways range of 14-15 with a possible extension to 15.5 on the upside. A rise in Silver prices could be seen while above 14; else a sharp fall could be in p[lace towards 13.5-13.0 in the medium term. Watch price action near 14 on a dip from current levels.
Copper (2.1950) has picked up some momentum but trades below 2.25 just now. A rise beyond 2.25 initially and then above 2.35/40 is needed to re-establish bullishness for the medium to long term. We may expect a test of 2.25 in the next few sessions.
Dollar Index trades higher dragging down Euro towards 1.10 or lower. Dollar Yen looks bearish in the medium term but could face interim support just below current levels. EURJPY too has interim support below current levels which if holds could produce a near term bounce. Aussie and Pound look bearish while below important resistances; but a test of resistance in the near term could be on the cards. Yuan and Rupee are trading weak but we may expect a short corrective move today.
Dollar Index (99.29) has risen from levels seen yesterday but 100 is the mark that we would look for to turn bullish again for the medium term. A break above 100, if seen would take it higher towards 101.20 or even higher towards 102 in the upcoming sessions say in the next 1-2 weeks. Look for a rise above 100 in the next couple of sessions.
Euro (1.1026) has dipped as Dollar Index rises towards 99+ levels. A further rise in the index could drag down Euro further towards 1.10-1.09.
Dollar-Yen (108.45) could test interim support near 106.50 just now which if holds could produce a small bounce from here towards 109. But overall medium term is bearish for a fall towards 106-104. Watch price action near 106.0-106.5 in the near term.
EURJPY (119.57) has immediate support near 118.5 on the downside which of holds could take the cross pair to higher levels of 121-121.50 in the near term. While above 118.5, the pair looks bullish for the coming sessions.
Aussie (0.6189) looks bullish for a test of 0.63-0.6350 in the near term as we have been stating in previous editions. From there we may expect a fall back towards 0.60-0.58 in the medium term.
Pound (1.2339) has dipped slightly instead of our expected rise towards 1.27 as interim resistance mentioned near 1.27 has held well. As mentioned yesterday, 1.25-1.27-1.29 are important near term resistances and while they hold, near term is bearish towards 1.21.
USDCNY (7.0879) has support on the daily candles near 7.08 and near 7.05 on the medium term charts. While above 7.05, the pair looks bullish for a rise towards 7.15 in the near term. Broad sideways trade in the 7.05-7.12 seems to be likely for the next 1-2 weeks with a possible extension to the upside towards 7.15 or even higher.
USDINR (75.6150) moved up exactly in line with our expectation of a rise towards 75.50-75.80. Note that 75.80 could be a decent resistance that could push back Dollar-Rupee down to 75.50-75.00 in the near term.
The US Treasury yields continue to trade subdued and are likely to dip further in the coming days. The German yields remain lower and can fall in the short-term. The 10Yr GoI can trade in a sideways range for sometime before breaking the range on the downside. The Reserve Bank of India had announced yesterday to open up specific government securities for foreign investors. This keep the yields under check.
The US 2Yr (0.22%) and 5Yr (0.39%) Treasury yields remain subdued while those at the far end, the 10Yr (0.71%) and 30Yr (1.32%) yields have risen well from the low levels seen on early Asian trades yesterday. However, our bearish outlook remains intact. The 10Yr is likely to remain below 0.8% and fall to 0.4%-0.3% in the short-term. The 30Yr can face resistance at 1.4% and can test 1.1% in the short-term.
The German 2Yr (-0.75%), 5Yr (-0.69%), 10Yr (-0.50%) and 30Yr (-0.02%) yields remain lower and stable. As mentioned yesterday, the 30Yr will need a watch to see if it can bounce-back above 0% or not. While below 0%, the 30Yr is bearish to test -0.20% on the downside. The 10Yr on the other hand can fall to -0.60% and even lower while it remains below -0.40%.
The 10Yr GoI (6.2091%) has risen well yesterday. The preferred range of 5.98%-6.40%/6.45% remains intact and a rise to 6.35%-6.40% is possible in the near-term. Broadly the bias is bearish and we expect the 10Yr GoI to break this range below 5.98% eventually.