Last week we were wary about profit-taking in Equities and most either indices saw a mild downtick or traded sideways. The biggest cloud hanging over the markets is the spike in Covid cases in the USA. Still, all of them retain their current uptrends for now, with room remaining on the upside while near-term Supports hold. That said, as many markets are nearing their pre-March levels, concerns over stretched valuations are coming up and suggest limited room on the upside. The markets have to give back some value in order to attract fresh investments.
A wait and watch stance seems appropriate looking at the Shanghai, Dow and Nikkei.
Within this, the Shanghai (3383) has staged a spectacular surge over the last two weeks, but has retreated a bit from the super-crucial 3450-3500 Resistance region. While it holds, we could see a dip into the 3300-3200 region. A break above 3500, on the other hand could trigger a massive rise
Contrary to expectation, the Dow (26075, +1.44%) moved up again on Friday retaining its uptrend and targeting 26750. The picture looks similar on the Nikkei (22659, +1.65%) which is up today after dipping on Friday. We have to wait to see if it manages to break above 23000 this week.
The DAX (12633, +1.15%) holds onto a surer uptrend with Supports at 12400-12300 and potential to rise to 13200 and higher.
Focus should be on the underdogs, the Nifty (10768.05) and Sensex (36594), which are outperforming the Dow in Dollar terms and look good for a rise towards 11200 and 38300 respectively.
Beware of the KOSPI (2150) which seems to have hit an insurmountable Resistance at 2200 and needs to dip towards 2100-2050 (at least) before it can try to break higher.
Copper has risen sharply but could face immediate resistance at current levels that could drag the price lower in the coming sessions. Crude prices dipped last week but have risen back. Crude could trade in a stable range for the near term. Gold and Silver have dipped too but need to break below immediate support levels in order to turn bearish for the medium term. Watch supports on Gold and Silver and resistance on Copper while crude may remain in a sideways range.
Brent (42.84) and WTI (40.17) did indeed dip to (and below) the mentioned Supports at 42 and 39 respectively on Friday, but have bounced back and continue to look good for a rise towards 50 (Brent) and 45 (WTI).
Gold (1809.00) has reversed sharply from levels below 1850 as a corrective fall but we would look at support near 1790 to hold just now and produce a bounce in the near term back towards 1830-1850. A sustained break below 1790 would be needed to see further bearishness in the near term.
Silver (19.30) has dipped after testing 19.50+ levels on Friday but holds above immediate support near 18.6/75. While the price remains above the mentioned support, we may expect a bounce back to higher levels in the near term. A strong break below the level of 18.50 is needed for Silver to be bearish.
Copper (2.9385) surged past 2.90 on Friday, instead of dipping from there. However, we see a stronger Resistance near current levels on the Monthly Candles. This has to either break with force, or produce a dip towards 2.80, in order to attract fresh buying.
Dollar Index trades lower today while Euro may have scope to test 1.14 before coming off from there. Aussie looks bearish while Pound could also have limited upside.
EURJPY looks likely for a rise from here while CNY and Rupee could weaken against the Dollar. Watch 75.30 on USDINR for the next few sessions.
Dollar Index (96.47) fell sharply from 97 on Friday and is finding difficult to move above 97 just now. While Dollar Index trades below 97, we may expect a range of 97-96 to hold for the near term.
Euro (1.1324) did dip to test 1.1254 on Friday but has bounced back to trade higher today. A test of 1.1406 looks possible on the near term charts. Thereafter a break on either side of 1.12-1.14 region would be needed to indicate further direction for Euro.
EURJPY (120.96) has also bounced well after a test of 120.27. The current bounce could be limited to 121.50 before we may expect another fall towards 120. Medium to long term view remains bearish.
Dollar-Yen (106.78) has fallen with a fall in Dollar Index. 106 is a strong support below current levels and if that holds we may expect a bounce back towards 107-108 in the medium term. For now we continue to see a fall towards 106.
Aussie (0.6968) is ranged below 0.70 and has not been able to rise in spite of a stronger Copper. If 0.70 continues to hold, we may have to allow for a dip to 0.68 before again seeing an upmove from there. There is scope for a rise towards 0.71-0.72 on the upside.
Pound (1.2654) rose from 1.2566 itself instead of seeing a fall towards 1.2527 as mentioned on Friday. But we would look at resistance near 1.2710 which if holds could limit the upside for Pound in the next few sessions.
USDCNY (7.00) has bounced back to levels above 7 and we may expect the immediate upside to be limited to 7.03. On the downside, there is support near 6.95.
USDINR (75.2050) needs a close watch in the next 1-2 sessions for a possible break above 75.30 as that could trigger a sharp rise to 75.50 or higher. While above 74.90, view is bullish.
The US Treasury yields have risen slightly but German yields are mixed. The US yields could be further bearish while the German yields can test immediate supports from where a rise looks possible. Only if the yields fail to rise from immediate supports, we may look for a further fall. The 10Yr GOI has support near 5.75% which if holds could see a bounce soon.
The US 2Yr (0.15%), the 5Yr (0.30%), 10Yr (0.64%) and the 30Yr (1.33%) have risen back by 1bps but could still have some room on the downside towards immediate supports. A dip to 0.60%-0.58% on the 10Yr and 1.30%-1.25% on the 30Yr could still be possible in the near term. View is bearish for the near term.
The German 2Yr (-0.694%) has fallen sharply while the 5Yr (-0.671%)and the 30Yr (-0.043%) have risen a bit. The 10Yr (-0.465%) is stable. As mentioned on Friday, there are immediate supports near current levels which if hold could possibly lead to a short bounce in the near term. Failure to rise from respective supports could drag the yields lower over the next 2-3 sessions.
The 10Yr GOI (5.7605%) if holds above immediate support at 5.75%, may rise higher towards 5.80/82% in the near term.