STOCKS
Equities continue to remain positive. There is room to rise further and test the next key resistances. As mentioned on Friday we will be watching cautiously as the major indices approach their resistances to gauge the chances for a sharp corrective fall. Dow can test 29000-29100 and need to breach 29100 to move up further. DAX can move up to 13400. Nikkie has dipped and needs to sustain above 23500 to keep the chances alive of testing 24000 on the upside. Shanghai can move up towards the upper end of its 2180-3450 range. Sensex and Nifty can test 41000 and 12100 respectively now.
Dow (28586.90, +161.39, +0.57%) has risen above 28500 and keeps intact the view of testing 28800-29000 on the upside now. As mentioned on Friday, 29000-29100 region is the next crucial resistance. The price action in this resistance zone will need a close and cautious watch to see if the Dow will breach 29100 and surge to 30000 levels or will fall to 28000-27000 again.
DAX (13051.23, +9.02, +0.07%) remained stable above 13000 on Friday. We retain our bullish view of seeing an extended rise to 13400 as against our earlier view of witnessing a reversal from 13200. Immediate support is at 13000 and the next is at 12800. The price action at 13400 will need a watch to get a cue on whether the DAX can move up further to 13800 or will reverse lower towards 13000-12800 again.
Nikkei (23552.28, −67.41, -0.29%) failed to break 23700 decisively on Friday and has come-off slightly. Nikkei will have to sustain above 23500 now in order to move up towards 24000. A break below 23500 can drag it to 23000 again. We will have to wait and watch.
Shanghai (3330.76, +58.68, +1.79%) has opened the week on a strong note. As mentioned on Friday, the 3180-3450 range has held very well and the index is moving up towards the upper end of this range. As such Shanghai can move up to 3450 in the coming days. A break above 3350 can accelerate the rally.
Nifty (11914.20, +79.60, +0.67%) is heading towards the 12000-12100 region as expected. The outlook is bullish. A strong break above 12100 will pave way for a further rise to 12250-12500 in the coming days. Inability to breach 12100 can trigger a corrective fall towards 11700-11500 first before a fresh rise to 12500 happens.
Sensex (40509.49, +326.82, +0.81%) sustained well above 40100 and has risen further. 40800-41000 is the next resistance zone that can be tested now. If the Sensex manages to breach 41000 decisively, the current rally can extend up to 41500-42000 going forward. The price action in the 40800-41000 region will need a close watch.
COMMODITIES
Commodities look mixed. Crude prices may remain stable or slightly dip from current levels while Gold, Copper and Silver look bullish. Silver and Copper could be headed towards 26-27 and 3.15/20 respectively but Gold is not looking as bullish as Silver just now and could spend some time in the 1940-1920-1900 region before deciding on further direction. Watch price action near current levels.
Brent (42.47) and Nymex WTI (40.25) could not sustain above 43 and 41.50 respectively and have instead fallen from these levels. We may look for 2-3 sessions of ranged or bearish movement before a pick up on the upside is seen. On the near term charts, there are equal chances of seeing either a rise towards 45 or dip to 40 on Brent and 43 or 37.50 on WTI.
Gold (1933) rose to almost test 1940 on Friday before slightly dipping back from there. Only on a sustained break above 1940, we may expect to see a further rise towards 1950/60 in the medium term. But while 1940 holds, we may expect trade within 1900-1940 to continue.
Silver (25.43) on the other had has risen well above 25 and while that holds, we may expect a test of 26-27 soon. Immediate view is bullish while above 24.40.
Copper (3.0720) is headed higher and looks bullish for a rise towards 3.15/20 in the near term.
FOREX
Weakness in Dollar Index pulls up Aussie, Pound, Euro, Yen and Yuan, most of which look bullish for the near term. EURJPY may dip slightly but we cannot negate a possible rise above 126. USDINR could come down to 73 or even lower in the near term.
Dollar Index (93.10) has dipped further and a break below 93 could take it down to 92.70 in the near term. This could be positive for commodities and other currencies overall.
Euro (1.1816) has risen well and is trading at our mentioned resistance near 1.1815. While the Dollar index looks weak towards 92.70, we may expect a further rise in Euro towards 1.19.
EURJPY (124.69) may dip slightly for next 1-2 sessions before resuming its upmove towards 126-126.80 on the upside. While the Dollar Index trades lower, EURJPY could be headed higher.
Dollar-Yen (105.50) is down on a weak Dollar Index and could test 105 or slightly lower before bouncing back from there. The broad range of 105-106.12 is likely to hold for now.
Aussie (0.7222) has been rising well on a break above 0.72 and while the upside momentum remains intact, we may expect a rise towards 0.73/74 soon.
Pound (1.3029) is also trading above 1.30 and could be headed towards 1.31/32 in the near term.
USDCNY (6.7199) fell sharply after the week-long holiday. We may expect a slow and steady rise from here back towards 6.75/80 or higher.
USDINR (73.1350) has high chances of falling towards 73 or lower in the near term. View is bearish. Upside could be capped at 73.50 just now.
INTEREST RATES
The US Treasury yields continue to trade higher. The hope of getting the next Covid relief package continues to weigh on the market. The Treasury yields can move up further in the coming days to test their key resistances and then can resume their long-term downtrend eventually. The German yields remain bearish and looks vulnerable to fall further from current levels itself without seeing a corrective bounce. The 10Yr GoI has declined sharply after the RBI’s policy announcement on Friday and has negated the earlier bullish view. The outlook is negative now and the 10Yr GoI has room to fall further.
The US 2Yr (0.15%), 5Yr (0.34%), 10Yr (0.77%) and the 30Yr (1.57%) yields have surged over 10bps in the last couple of weeks at the far-end (10Yr and 30Yr). The 30Yr and 10Yr have come closer to 1.60% and 0.80% in line with our expectation. As we had mentioned last week, the 30Yr can extend the current up move to 1.72% if it manages to breach 1.60%. Similarly, the 10Yr can rise to 0.90% if it breaks above 0.80%. Thereafter the yields can reverse lower to resume the long-term downtrend.
The German 2Yr (-0.72%), 5Yr (-0.73%), 10Yr (-0.53%) and the 30Yr (-0.10%) yields remain lower and stable. Our view remains the same. Inability to bounce from current levels will reduce the chances of a corrective bounce to 0% (30Yr) and -0.42% (10Yr) that we had mentioned earlier last week. In turn that would keep the broader downtrend intact and drag the yields lower to -0.60% (10Yr) and -0.20% (30Yr) in line with our expectation.
The 10Yr GOI (5.9376%)has declined sharply breaking below the supports at 5.98% and 5.95%. The outlook is bearish to test 5.90%-5.85% now. The region between 5.98% and 6% will act as a good Support-turned-Resistance now and will cap the upside. Our earlier bullish view of seeing 6.08%-6.10% on the upside stands negated now.
