STOCKS
Shanghai has surged and remains an outperformer in line with our expectation while the other major indices remain stable within our preferred sideways range. Shanghai looks strong and has the potential to move further higher over the medium-term. On the other hand , the other major indices are expected to consolidate for some more time and then move higher breaking their respective ranges on the upside. 25000-26500 is the range that can be seen in the Dow and the DAX can trade between 11900/12000 and 12500. Nikkei retains its 22000-22600 range. Sensex and Nifty can move higher within their respective range of 34000-36000 and 10200-10600.
Dow (25734.97, −77.91, -0.30%) tested 26000 and has come-off slightly. Our view remains the same. 25000-26500 can be the range seen for some time and the index can move up within this range in the near-term. The bigger picture remains bullish to see an eventual break above 26500 and a rise to 27000-28000.
DAX (12260.57, −50.36, -0.41%) seems to lack strong follow-through rise above 12200 and has come-off yesterday. We can look for the index to consolidate in the range of 11900/12000-12500 for some time before our preferred rise to 12800 and 13000-13200 happens. A strong rise past 12500 is needed to accelerate the rally.
Nikkei (22266.23, +144.50, +0.65%) remains stable above 22000. Our view remains the same. Nikkei can consolidate between 22000 and 22600 for some time and then see a rise to 23000-23200 initially and then 23800-24000 eventually. 21500 is a slightly deeper support available below 22000.
Shanghai (3047.42, +21.44, +0.71%) has surged further to test 3050 as expected. The rise to 3050 has happened much faster than we had expected. There is resistance in the 3050-3060 region from where an intermediate dip to 3025-3000 is possible. However, from a bigger picture Shanghai could now be gearing up to target 3150-3200 in the coming weeks while it sustains above 3000.
Nifty (10430.05, +127.95, +1.24%) has broken above 10400 and can move up to 10600 gradually while it sustains above 10400. The wider range of 10200-10600 has now come into the picture and can remain in place for some time. As mentioned yesterday, a strong rise past 10600 is needed to confirm the resumption of the uptrend.
Sensex (35414.45, +498.65, +1.43%). on the other hand will need a strong rise past 36000 in order to gain momentum and move further up to 37000. Else it can remain in the range of 34000-36000 for some time before breaking above 36000 eventually.
COMMODITIES
Overall commodities are mixed. Crude prices are trading slightly higher today along with a rise in Copper but could test crucial near term resistances above current levels from where a dip could be expected in the coming week. On the other hand, Gold and Silver have dipped from higher levels seen yesterday. The dip could be short lived and we may soon expect a bounce back to higher levels.
Brent (42.04) and Nymex WTI (39.82) have risen slightly and could soon test the upper limits of $45.27 and $41. WTI could test its upper target before Brent and if any rejection is seen on WTI from 41, we may expect a pull back in Brent too from levels near 43.85 itself. Watch price action above current levels. Overall broad range of 45.27-37.50 and 41-35 is likely to hold for some more time in Brent and WTI respectively.
Gold (1778) tested 1810 and has dipped back sharply from there. While below 1790, there is scope for correction to extend upto 1770-1750 on the downside before another bounce is seen again targeting 1830-1850 on the upside. Only a sharp and sustained break below 1750, if seen could negate further upside from here. Overall bias is towards a bullish view for the medium term.
Silver (18.23) declined from 18.85 itself, instead of testing 19 on the upside. While below 19, Silver might dip back towards 18.0 or even 17.5 in the coming sessions. Watch price action near 17.5-18.0 to see if it manages to see another bounce from there in the early sessions next week.
Copper (2.7595) is headed towards resistance seen on the 3-day candles near 2.80/81 (revised from 2.80/85 mentioned yesterday) from where a rejection is expected back towards 2.75/70 in the coming week. Overall bullishness is limited for the near term just now.
FOREX
Most currency pairs including Euro, EURJPY, USDINR, Dollar Yen and Dollar Index look stable and could range in a narrow sideways trade for the near term. Yuan trades near crucial levels and a make or break from 7.06 could be the decider for further direction. Aussie and Pound look bullish for the near term.
Dollar Index (97.12) dipped further but the sideways range is narrowing down for the near term. Immediate support is now visible near 96.90, which if holds could take the index back to 97.80 in the coming week. Overall range of 97.80-96.90 could hold in the near term. Thereafter, a break on either side would decide on further direction.
Euro (1.1257) could trade in the 1.1200-1.1290 region for the next few sessions before breaking on either side too give medium term directional clarity.
EURJPY (121.02) is also stuck in a sideways range and could trade within 120.5-121.70 in the near term. While Dollar-Yen and Euro remains stable, we may expect EURJPY to remain steady too near current levels.
Dollar-Yen (107.51) could range on the 107.24-108.20 region for the next few sessions before again attempting to rise past 108.20 towards 109 on the upside.
Aussie (0.6918) looks bullish for the near term and could target 0.70/71 in the medium term.
Pound (1.2482) looks bullish for the near term and could target 1.2730 on the upside while it sustains above 1.24.
USDCNY (7.0670) has immediate support near 7.06. Note that this is a crucial level and price action from here would be important decider of further direction from here. A bounce could take it higher towards 7.10 else a break below 7.06 could drag it towards 7.04 on the downside.
USDINR (75.5950) closed higher after testing 75.48 on the downside yesterday. While above 75.40, we continue to expect ranged movement within 75.40-75.65/75. Only a break below 75.40 would enable a possible test of 75.25/20; else we may expect the pair to start moving up.
INTEREST RATES
Positive economic data releases from the US supports the Treasury yields to sustain higher. As mentioned yesterday we will have to see if our preferred reversal happens from here itself or not. The German yields have moved up and are poised at crucial resistances which we expect to hold and produce a reversal. A further rise from here will negate our bearish view. The 10Yr GoI has declined below a key support and is now bearish to fall further.
The US 2Yr (0.16%), 5Yr (0.31%), 10Yr (0.68%) and the 30Yr (1.43%) sustains higher but stable. As mentioned yesterday it will have to be seen if the yields can move up from here itself rather than seeing a further dip. We have been expecting a dip to test the supports at 0.60%-0.58% (10Yr) and 1.30%-1.25% (30Yr) and then reverse higher to begin a fresh leg of rally. We will have to wait and watch.
The German 2Yr (-0.67%), 5Yr (-0.65%), 10Yr (-0.40%) and the 30Yr (0.05%) yields have moved up sharply especially at the far-end. The 10Yr and 30Yr are poised at a crucial level and we expect them to reverse lower again from here to keep our bearish view of seeing -0.50%/-0.60% (10Yr) and -0.10%/-0.20 % (30Yr) on the downside. A further sustained rise from here will negate our bearish view.
The 10Yr GoI (5.8388%) has declined and closed below 5.85% yesterday. The break has come in much faster than we had expected. While below 5.85% the outlook is bearish to see a further fall to 5.80% and even 5.75% in the coming days.
