STOCKS
A strong follow-up rally on all major indices has reduced our concern of the strength of the current bounce-back move that we had citied yesterday. The danger of seeing any further sharp fall has reduced now and the bias is tilting towards bullishness. However, indices like the Dow, Sensex and Nifty have to breach their key resistances ahead in order to confirm the bullishness. Similarly, Shanghai has to sustain above 2800-2820 in order to move further higher. Nikkei and DAX look relatively better placed among the lot and can move higher for the rest of the week.
Dow (28807.63, +407.82, +1.44%) has risen well into the 28500-29000 resistance clusters. Contrary to our expectation the chances of seeing a break above 29000 seems to be increasing. Such a break will reduce the possibility of seeing a fall to 28000-27700 that we had been expecting and will take the index higher to 29100-29200. However, a strong rise past 29200 will be needed to completely negate the bearish view.
DAX (13281.74, +236.55, 1.81%) has risen back above 13200 and has negated the chances of seeing a break and fall to 12700. The price action on the 3-day candles indicates that a further rise to 13400 and 13600 is likely to be seen again while the index sustains above 13000.
Nikkei (23338.16, +253.57, 1.10%) has risen back well above 23000 again. It can test 23600 now while it sustains above 23200. A strong rise past 23600 will then pave way for a further rise to 24000-24100 again and will negate our bearish view of seeing 22000-21500 on the downside.
Shanghai (2835.20, +51.92, 1.87%) has risen past the 2800-2820 resistance region. It will have to be seen if it can sustain this break or not. A strong close above 2820 today will reduce the danger of seeing 2600 on the downside and in turn will keep the outlook bullish to test 2900 on the upside.
Nifty (11979.65, +71.75, +2.32%) has surged well beyond 11850 that we had mentioned in our Moring Briefing yesterday. 12030 will be an important resistance to watch now. A break above it can take the Nifty further higher to 12100-12200 which in turn will reduce the chance of seeing a fall-back again that we have been looking for.
Sensex (40789.38, +917.07, +2.30%) has an immediate resistance at 40800. A strong break above it will see a rise to 41300-41400 again. Such a break will also reduce the chances of seeing a fall to 39000-38000 that we have been mentioning over the last few days.
COMMODITIES
Strong rally in global equities resulted in sell off in Gold dragging it lower to break below immediate support near 1570. Crude prices look stable without much movement from levels seen yesterday. But we would continue to watch immediate supports on Crude prices for a near term corrective bounce. Silver has dipped slightly too while Copper has attempted to trade higher and could move up in the near term.
Gold (1558.70) has fallen below support near 1570 mentioned yesterday and could have scope of testing lower supports near 1550-1540 over the next few sessions. Note that 1540 is a crucial medium term support that could produce a bounce back towards 1560 or higher in the longer run. Only a sustained break below 1540 would make us turn bearish on Gold. Watch price action near 1550 and 1540 in the upcoming sessions.
Silver (17.56) is trading above 17.50, maintaining its potential rise from current levels. On the charts, a break below 17.5 is important for it to fall towards 17.00-16.5 in the medium term. Watch for a break or bounce from 17.50.
Brent (54.63) and Nymex WTI (50.21) have dipped slightly as API weekly report states a crude oil inventory build of 4.18mln barrels for week ended 31st Jan’20 compared to analyst expectations of 2.8 mln barrel build. As mentioned yesterday, we would continue to look at crucial supports below current levels at 54 and 50 for Brent and WTI respectively. Although there is possibility that Brent may fall towards 50, a bounce in WTI from 50 could limit a Brent and pull it higher in the near term.
Copper (2.5625) has been rising well from support near 2.4945 and while that holds, we may expect a corrective rise in price towards 2.65/2.70 in the near term. View is bullish just now for Copper.
FOREX
Pound looks weak for the near term but could take a breather ahead of the EU-UK trade negotiations but may start weakening again as both UK Prime Minister Boris Johnson and EU chief negotiator Michel Barnier clearly do not intend to positively participate in the said negotiations. Aussie gained after the RBA left rates unchanged and on rising Copper prices as concerns of Coronavirus seems to be reduced for now leading to some recovery in the Chinese related asset classes. Dollar Index trades higher dragging the Euro lower and pulling up USDJPY. Yuan is stable just now and USDINR has bounced from important support yesterday.
US Dollar Index (98.02) has risen back as expected and has scope for a test of 98.25/35 on the upside before seeing a dip from there.
Euro (1.1034) is holding well below resistance at 1.11. There is scope for a test of 1.10 before again rising higher. Note that the broad range now shifts to 1.1080-1.0980 from the earlier 1.11-1.10 for the near term.
Dollar-Yen (109.46) rose sharply from 108.31 (instead of testing our expected 108) and is trading above 109 just now. Apart from the trend supports on the technical price chart, the rise in Dollar Index and fall in Gold prices have aided to the sharp pull back in USDJPY. We may expect a rise towards 110 in the near term.
EURJPY (120.78) is trading above 120 just now with a potential rise towards 121.00-121.30 before again falling sharply to lower levels of 119. Immediate view is bullish with medium term bearishness intact.
Pound (1.2992) has surprisingly broken below 1.30 contrary to our expectation of a rise beyond 1.32 as Brexit tensions resurfaced and statements from the UK and European Union indicated possible failure of negotiations on trade deal. While bears look strong for now, we may expect a fall in Pound towards 1.2950-1.2900.
Aussie (0.6734) has risen and is trading above the support mentioned near 0.6650 yesterday. While the support holds, Aussie looks bullish towards 0.68.
USDCNY (7.0045) is trading near 7 but is expected to fall lower towards 6.95/96 in the near term. Upside is likely to be capped near 7.04.
USDINR (71.2750) closed higher after testing 71.0850 yesterday. Note that 71.10/08 is a strong support just now on USDINR and while that holds, the pair could be pushed higher to re-test 71.40. Note that a sustained rise past 71.40 is needed to turn bullish again on USDINR; else we remain fairly bearish while below 71.40 for a possible and eventual test of 71.
INTEREST RATES
The US Treasury yields have risen sharply as risk appetite seems to be getting back into the markets as a result of which the global equities have been surging over the last couple of days. The Treasury yields have room to move up if they manage to sustain higher which would then negate our earlier view of seeing further fall. The German yields have also risen-back but have key resistances ahead which need to be broken in order to negate the chances of a fall again. The 10Yr GoI is holding above its key support and can trade sideways in the near-term before moving down again.
The US 2Yr (1.41%), 5Yr (1.42%), 10Yr (1.60%) and 30Yr (2.08%) Treasury yields have moved up sharply across tenors. . The near-term outlook has turned bullish and a further fall that we have been expecting seems to be not happening. The 10Yr can now move up to 1.70% and 1.75% while is trades above 1.55%. The 30Yr on the other hand can rise to 2.25% while it remains above 2.05%.
The German 2Yr (-0.66%), 5Yr (-0.62%), 10Yr (-0.40%) and 30Yr (0.11%) yields have bounced-back well yesterday but need to be seen if they can sustain higher and negate our bearish view of seeing further fall. The 10Yr can move up to -0.30% if it sees a sustained break above -0.40%. The 30Yr has an immediate resistance at 0.13% which needs to be broken in order to take it further higher to 0.20% again.
The 10Yr GoI (6.5061%) is managing to hold above the key support level of 6.49%. While this support holds, a sideways move between 6.49% and 6.5250% or 6.55% can be seen in the near-term. However, while below 6.55% the bias is bearish to see a break below 6.49% and fall to 6.45%.
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