STOCKS
Asian equities are trading in the red and keep alive the chances of seeing a sharp fall going forward. Nikkei can fall to 28000-27000 while it remains below 30000 and Shanghai can test 3450-3400. Sensex and Nifty have surged past 51000 and 15000 respectively but need to see if they sustain their gains on the back of the sharp fall in Asian markets in the morning. Dow is struggling to gain momentum to rise past 31650 and looks vulnerable for a fall below 31000. DAX is retaining its 13800-14200 range and the bias remains negative to see a downside break of this range. Overall we continue to remain cautious on the equity segment.
Dow (31270.09, −121.43, -0.39%) has come-off failing to breach 31650. A fall below 31000 can take it to 30000. A further break below 30000 will confirm a reversal and drag the Dow lower to 29000-28000 thereafter. While the Dow manages to sustain above 31000, a range of 31000-32000 is possible and the above mentioned fall below 31000/30000 will get delayed. Also the upside is likely to be capped at 32500-33000 even if a strong break above 32000 is seen.
DAX (14080.03, +40.23, +0.29%) tested 14200 and has come-off from there. The 13800-14200 range remains intact. Our broader view remains the same. A fall to 13200 is more likely to be seen in the coming weeks. However, we may have to allow for an extended rise to 14500-14600 before the above mentioned fall happens in case if DAX breaks above 14200 decisively now.
Nikkei (29014.80, −544.30, -1.84%) has declined sharply and keeps our view of seeing a fall to 28000 intact. A break below 29000 can trigger this fall. The downside can even extend up to 27000. A strong rise past 30000 is needed to negate the above mentioned fall.
Shanghai (3520.83, −56.08, -1.57%) is oscillating between 3500 and 3575 over the last few days. While below 3575, the chances of seeing a break below 3500 and a fall to 3450-3400 cannot be ruled out. But we reiterate that 3450-3400 is a strong long-term support zone from where a fresh rally is possible. Shanghai will be a good long-term buy in the 3450-3400 zone.
Sensex (51444.65, +1147.76, +2.28%) and Nifty (15245.60, +326.50, +2.19%) have surged above the crucial levels of 51000 and 15000 respectively. It will have to be seen if they can sustain above these levels today amid the sharp fall in Aisan markets in the morning. A strong pull-back below 51000 (Sensex) and 15000 (Nifty) will keep the indices under pressure to fall again. Sensex and Nifty will have to sustain necessarily above 51000 and 15000 respectively in order to move up further towards 52500-53000 and 15400-15600 respectively. The price action today will need a close watch.
COMMODITIES
Precious metals fall as Dollar regains strength after a brief dip seen yesterday. While the Dollar Index continues to move up, the metals could be vulnerable to a further fall. Crude prices may rise a bit over the next few sessions. Market eyes on the OPEC meet scheduled today.
Brent (64.24) and WTI (61.35) have risen well contrary to our expectation of a dip. On the upside there is scope for a test of $68-70 on a sustained break above $65 on Brent and WTI may move up to test $65-67. Note there is OPEC meet scheduled today and may involve volatility in crude prices over today and tomorrow. Downside for Brent and WTI could be limited to 61 and 59-58 respectively.
Gold (1711.40) has fallen yet again, unable to sustain above 1730. Watch if 1700 holds in the near term. A broad range of 1700-1750 looks possible for now. Failure to hold above 1700 would open up chances of a fall to 1660.
Silver (26.25) to has fallen towards 26 again and needs to sustain above 26 to move up slowly in the near to medium term. Watch price action near 26.
Copper (4.1285) has also dipped a bit. While above 4, view is bullish towards 4.30.
FOREX
Dollar Index trades above 91 again and could keep Euro in the 1.20-1.21 region for now. Rising Dollar has pulled up USDJPY above 107 and could take it higher towards 107.50-108. Aussie, USDCNY and Pound look stable and ranged. EURJPY may remain below 130 while Euro trades lower. USDINR may hold above support at 72.60/70 and bounce back towards 73.00-73.20 again.
Dollar Index (91.04) has bounced to re-attempt a break above 91. We may expect a test of 91.50 on the upside but whether it manages to break above that or not is to be seen. A break above 91.50 could weaken most currencies against the Dollar from current levels.
Euro (1.2050) could remain within 1.20-1.21 for a few sessions before throwing some clarity on further direction. For now watch support at 1.20 a break below which could drag it lower to 1.1950.
EURJPY (129.07) looks stable just now while below immediate resistance near 130. Downside could be limited to 128 for the very near term. Only a break on either side of the range would indicate further movement.
Dollar-Yen (107.07) continues to trade higher and has broken above 107. It could now head towards 107.50-108 on the upside before turning lower from there if the Dollar Index remains strong. Immediate view is bullish above 107.
Aussie (0.7787) has fallen yet again, possibly delaying chances of a rise to 0.79.For the very near term we may look at 0.77-0.7850 range to hold.
Pound (1.3858) looks ranged within 1.40-1.38 for the near term and may trade sideways for the near term.
USDCNY (6.4706) remains stuck within 6.44-6.48 and may continue so for some more sessions.
USDINR (73.72) may hold above important support near 72.60/70 from where a bounce back to 73 or higher looks possible in the near term. Narrow range of 72.60-73.00 and broad range of 72.60-73.20 could hold for the near term.
INTEREST RATES
The US Treasury yields have risen back sharply across tenors as expected. Our overall bullish view remains intact and the yields can move up further in the coming days. The supports on the German Yields are holding well in line with our expectation. The yields have bounced-back from near these supports and remain bullish. A further rise is possible in the coming days. The 10Yr GoI sustains higher and is bullish to move up further. But crucial resistance is coming up to 6.30% from where a reversal is possible.
The US 2Yr (0.14%), 5Yr (0.73%), 10Yr (1.48%), 30Yr (2.27%) Treasury yields have risen back sharply across tenors in line with our expectation. This keeps our bullish view intact. The 10Yr can rise to 1.55%-1.60% again and the 30Yr to 2.50% in the coming weeks. As mentioned yesterday, a strong fall below 1.30% (10Yr) and 2.10% (30Yr) is needed to negate the bullish view and turn the outlook bearish.
The German 2Yr (-0.69%), 5Yr (-0.61%), 10Yr (-0.29%) and 30Yr (0.21%) yields have bounced-back across tenors. The support at 0.15% on the 30Yr and -0.35% on the 10Yr has held very well as expected. This keeps our bullish view intact of seeing -0.20% and -0.15% on the upside. The 10Yr and 30Yr will have to fall below -0.40% and 0.10% decisively in order to become bearish.
The 10Yr GoI (6.2373%) sustains higher and keeps the bullish view intact of testing 6.28%-6.30% on the upside. Support is now at 6.19%. However, we reiterate that 6.30% is a strong resistance that can cap the upside for now and trigger a reversal going forward.
