STOCKS
The rally in the equities seems to lose steam although the major indices remain higher. DAX is struggling to breach 12800 and Shanghai remains below 2950. Nikkei and Dow sustain higher but seem to lack strength to move up to test their crucial resistances. Sensex and Nifty also looks vulnerable to fall from current levels itself before resuming the overall uptrend. Broadly we will have to wait and watch the price action over the next few days to get a clear cue on whether the corrective fall that we have been expecting will happen from here itself or after a further rise.
Dow (27272.30, −300.14, -1.09%) has dipped yesterday but remains above 27000. While above 27000 our view of seeing a rise to 28000 remains intact before we see a corrective fall. Supports are at 27000 and at 26800-26600. Only a fall below 26600 will negate the chances of seeing a rise to 28000 and will trigger a fall from here itself.
DAX (12617.99, −201.60, -1.57%) seems to be struggling to breach 12800 over the last few days. 12500 will be an important levels a decisively fall below which will negate the chances of seeing 13500-13800 for now. In that case a corrective fall to 12000 or even lower levels can happen first before a fresh leg of upmove begins to target 13500-13800 levels over the medium-term.
Nikkei (23130.69, +39.66, +0.17%) continues to sustain above 23000 but still seems to lack momentum. We retain our view of seeing a rise to 24000 while the index remains above 23000 and we will be looking for a corrective fall to 22000 or even lower from 24000.
Shanghai (2937.32, −18.80, -0.64%) has failed to sustain the break above 2950 seen yesterday. Our broader view is bullish to see a rise to 2975 for which a strong rise past 2950 is needed. While below 2950, the index can remain in the range of 2925-2950 (narrow) or 2900-2950 (wider) for some more time.
Nifty (10046.65, −120.80, -1.19%) is struggling to rise past 10200 decisively. As mentioned in the Evening Comments yesterday the chances are increasing to see a break below 10000 from here itself which will bring back the chances of seeing 9800 on the downside again. So our view of seeing 10500-10750 on the upside could get delayed.
Similarly, Sensex (33956.69, −413.89, -1.20%) can also fall to 33000-32000 from here itself before our preferred rise to 36000 happens. A strong rise past 35000 is needed to avoid the above mentioned fall which looks less probable on the charts unless we get a strong bounce today.
COMMODITIES
The American Petroleum Institute (API) has estimated a large crude oil build of 8.42 mln barrels for the week ending 5th June against analyst expectations of a small inventory draw of 1.738 mln barrels. Also the EIA short term energy report released yesterday showed a rise in 2020 forecast for crude while the expectations for US production levels have been reduced. The rise in projection for WTI and Brent are up by 16.7% and 11.4% from what was released in its May’20 report. Crude prices have dipped slightly on inventory build estimates by API. We may expect the corrective dip to continue for 1-2 sessions before a bounce is seen again. Gold remains strong and does not show any intrinsic weakness just now. A test of 1740 is possible before a fall is seen again. Silver and Copper are bullish for the medium term.
Brent (40.71) has dipped from levels above 41 seen yesterday and could continue to see the corrective dip extend for another couple of sessions before a bounce towards $45 is seen. Note that 45 could act as a decent resistance for the near to medium term.
Nymex WTI (38.21) has dipped slightly too but could be limited to 36-35 on the downside before again rising back towards 41. Overall longer term view is bullish after the current correction is over.
Gold (1724.00) has taken back all hopes of a possible fall on an initial break below 1700 last week but it just doesn’t want to break from the broad range of 1680/60-1740/60. Our mentioned immediate trend resistance near 1720 has now been broken and the price could head towards 1730/40 in the near term. While Dollar Index is expected to bounce back from current levels in the medium term, a further fall below 96.27 (refer to forex section below) if seen could be bullish for Gold towards 1740/60 again. Only a sharp bounce in dollar Index could curb the rise in Gold and lead to a dip again towards 1680-1660 in the coming sessions.
Silver (17.85) could test support at 17.30/50 from where a bounce looks possible in the near term. Overall view is bullish for Silver in the medium term while it sustains above 17.30.
Copper (2.6070) has risen well and could test immediate resistance at 2.65 which is likely to hold and push the price down towards trend support at 2.50. Overall medium term view is bullish just now with a possible rise to 2.65 initially and maybe 2.70/75 later on.
FOREX
Dollar Index trades lower ahead of the FED meeting scheduled today. We will wait to see if it manages to bounce back from 96.27 or head lower to test 95.94/70 in the near term. Euro is up sharply and could rise further as the upward momentum looks strong just now. Dollar-Yen looks bearish while Aussie and Pound have some more room to rise in the next 2-3 sessions. Yuan is strong but Rupee may either continue to remain ranged or weaken towards 75.75 as RBI intervention is seen at stronger levels, not allowing USDINR to fall.
Dollar Index (96.35) has fallen ahead of the FED interest rate decision today. Market expects rate to remain unchanged but some analysts expect that the FED may come up with a new monetary policy tool, putting a cap on treasury yields. Our mentioned support near 97.27 is almost being tested and is the index continues to fall further, we may look for lower levels of 95.94-95.70 to be tested in the near term before a bounce sets in.
Euro (1.1343) has risen back sharply contrary to our expectation of a fall to 1.1220 or lower. This rise is significant and the upward momentum looks strong just now. A fall in Dollar Index towards 95.70, if seen could take the Euro up towards 1.15 before a sharper dip is seen from there. Watch price action near current levels closely.
EURJPY (122.15) did fall to test 121.29, lower than our expected 121.40 but has bounced back sharply as the Euro went stronger. A rise to 122.60 is possible while Euro remains strong.
Dollar-Yen (107.67) is falling in line with the fall in dollar index and could test 107.40 within the current fall before a possible bounce is seen. Failure to bounce from 107.40 could open up chances of seeing a further fall to 107.
Pound (1.2735) did test 1.2617 yesterday, lower than our expected 1.2648 but the fall did not sustain as the exchange rate shot up to earlier levels again. Resistance is seen at 1.28 from where a dip looks possible in the medium term.
Aussie (0.6972) has risen from support near 0.6890 and could be ranged in the 0.6890-0.7050 for some sessions before moving on either side in the medium term. View is bullish while Aussie holds above 0.6890.
USDCNY (7.0727) continues to trade below 7.08 and while the fall sustains, we may expect a test of 7.06/05 before a possible bounce.
USDINR (75.6150) does not seem to get any benefit from the Euro or Yuan strength or from the Dollar weakness. While Indian equities are expected to dip in the very near term, we will have to see if USDINR manages to dip to 75.40/30 or rises to test upper resistance at 75.75 just now. RBI has been buying at lower levels not allowing Rupee to strengthen; if that continues, we may well see a break above 75.75 soon.
INTEREST RATES
The Treasury yields remain lower and keep our view of seeing a near-term corrective dip intact before moving up again. The US Federal Reserve meeting is due today. While there is no change expected on the rates front, market will be keen to see any ques for more stimulus and the economic outlook from the Fed. The German yields remain stable and can dip in the coming days before resuming its uptrend. The 10Yr GoI can move down within the preferred 5.95%-6.10% range and then can reverse higher.
The US 2Yr (0.21%), 5Yr (0.40%), 10Yr (0.83%) and 30Yr (1.58%) Treasury yields have dipped further across tenors in line with our expectation within the overall uptrend. As mentioned yesterday, the 10Yr can test 0.80%-0.75% and the 30Yr can dip to 1.55%-1.50% in the near-term. Thereafter the yields can reverse higher to target 1% (10Yr) and 1.80% (30Yr) on the upside eventually.
The German 2Yr (-0.63%), 5Yr (-0.57%), 10Yr (-0.31%) and 30Yr (0.19%) remains lower but stable. The trend is up. But as mentioned yesterday we will be looking for a near-term corrective dip before a fresh leg of upmove begins. As such, the 10Yr can dip to -0.40% and the 30Yr to 0.15%-0.10% in the coming days and then can reverse higher again.
The 10Yr GoI (5.9913%) has dipped below 6% and can test 5.95% on the downside before reversing higher again. Our view of seeing a range of 5.95%-6.10% remains intact.
