STOCKS
A further strong surge in the equity markets across the globe. The bounce-back moves in the global equities have been happening much quicker than we had anticipated as the market gathers momentum at a faster pace. All indices like the Dow, DAX, Nikkei are bullish. Shanghai is out of danger as long as it sustains above 2800. Sensex and Nifty have risen past their key intermediate resistances and can move further higher. The chances of seeing a fall-back in Sensex and Nifty stands reduced now.
Dow (29290.85, +483.22, +1.68%) has broken above 29000 and has closed on a strong note . This has completely wiped out the danger of seeing 28000-27700 on the downside that we had been warning for more than a week. While above 29000, the outlook is bullish now and a rise to 29750 and 30000 looks possible now. A strong break above 29400 can accelerate the rally.
As expected DAX (13478.33, +196.59, +1.48%) has risen further and indeed has breached our first target level of 13400 much faster than we had anticipated. The bullish outlook is intact and the index can now head towards our next target level of 13600. Indeed we expect the current upmove to extend even upto 13750.
Nikkei (23797.99, +478.43, +2.05%) has surged further and indeed much beyond 23600 that we had mentioned yesterday. The bullish outlook is intact. The break above 23600 today has paved way for a test of 24000-24100 on the upside. 24100 is a crucial range resistance which will need a close watch in the coming days.
Shanghai (2833.14, +15.06, +0.53%) sustains well above 2800. While above 2800 the near-term outlook is bullish to test 2875 and 2900 on the upside. Only a fall below 2800 again will bring back the danger of seeing 2600 on the downside. But that looks less likely now.
Nifty (12089.15, +109.50, +0.91%) has risen above the key resistance level of 12040 and could now test 12165-12200 in the near-term. A further break above 12200 will then pave way for a revisit of 12400. While above 12000 the danger of seeing 11900-11800 on the downside is less and the bias is bullish to see a rise to 12400 more likely.
Sensex (41142.66, +353.28, +0.87%) has risen above 41000 thereby reducing the danger of seeing 39000-38000 on the downside. The near-term view is positive and the Sensex can move up further to 41400-41500 where it can find some resistance. A strong break above 41500 will then pave way for a revisit of 42000-42200. Support for the Sensex is now in the 40800-40700 region.
COMMODITIES
Commodities are stable or in a recovery mode just now. Crude prices have moved up from respective support levels and look bullish for the near term while Gold and Silver are stable but they too trade above immediate supports which if holds could keep them higher for now. Copper, like the crude price have set into a recovery mode after the sharp fall seen through Jan’20. Some upmove is expected in the near term.
Gold (1558.70) and Silver (17.63) are stable. Gold has bounced from 1551 and Silver is trading at just above trend support on the daily candles. While above 1540 and 17.5, both Gold and Silver could rise back towards 1580 and 18 respectively. A decisive break below 1540 and 17.5 respectively is needed to turn bearish for the medium term.
Brent (55.96) and Nymex WTI (51.57) have bounced from 54 and 50 respectively as preferred. Supports on the 3-day is holding for both Brent and WTI indicating a rise now towards 58 and 55.50-56.00 respectively in the near term.
Copper (2.6015) has bounced as expected and could test 2.65/70 on the upside in the near term. Immediate view is bullish.
FOREX
Stronger Dollar Index has dragged down Euro and pulled up Dollar-Yen. This could continue if the Dollar index rises further towards 98.50 or higher. Rise in Yuan and Copper prices have pulled up Aussie that looks bullish for now. Pound however could dip a bit ahead of the UK-EU trade negotiations.
Dollar-Rupee could see some movement as stronger Dollar could pull it towards the upside but a stronger Yuan could give some relief. Moreover, markets would wait for the RBI policy statement due today where markets expect no change in rates or monetary policy stance.
US Dollar Index (98.30) has risen well in line with our expectation of rising towards 98.25/35 mentioned yesterday. It is now to be noted if the index faces rejection from 98.35-98.50 region to fall back towards 97.50 or manages to rise above 98.50 just now to head higher. A rise above 98.50 would keep the upside momentum and the channel on the weekly candles intact.
Euro (1.0995) has fallen on stronger Dollar. Only if the Dollar index rises further towards 98.50 and beyond, we may look for test of 1.09 on the downside for Euro in the medium term. We would be cautious below 1.10 for the next few sessions and wait for confirmation.
Dollar-Yen (109.88) is trading higher and could test 110.5 in the near term before coming off from there. View is bullish for the near term.
EURJPY (120.85) could rise towards 121.00-121.30 in the near term before again falling sharply to lower levels of 119. Immediate view is bullish with medium term bearishness intact.
Pound (1.2987) trades below 1.30 and could fall targeting 1.2950-1.2900 in the near term.
Aussie (0.6748) continues to rise on rising Copper prices and stronger Yuan. Some recovery is now expected in the commodity-linked currency and could attempt to rise towards 0.68 as mentioned yesterday.
USDCNY (6.9723) has fallen as expected and could come down further towards 6.96/95 in the near term. View is bearish for USDCNY.
USDINR (71.1690) is likely to trade in the 71.08-71.30 region today with a possible test of 71 on the downside. However, a decisive break above 71.40 is needed to bring in fresh bulls. While stronger Yuan could be a relief to the EM currencies including the Rupee, falling Euro and a stronger Dollar could be concerning that could possibly keep Rupee stable for now.
INTEREST RATES
Strong rally in equities is continuing to weigh on the bonds and the US Treasury yields have gone up sharply on increased risk appetite in the market. The US private payrolls data beating the market expectation by a huge margin also supported the rise in the US yields yesterday. The near-term outlook is bullish and the Treasury yields can move further higher. The German yields are managing to sustain higher and can move up further which would then reduce the danger of seeing a fall-back again. The Indian 10Yr is holding above its key support and can move up in the near-term while it sustains above the support. The Reserve Bank of India’s monetary policy outcome is due today and the central bank is expected to keep the rates unchanged.
The US 2Yr (1.44%), 5Yr (1.46%), 10Yr (1.65%) and 30Yr (2.15%) Treasury yields have risen further in line with our expectation. Indeed the upmove is happening much faster than we had anticipated. . As mentioned yesterday, the outlook is bullish and the 10Yr can move up to 1.70%-1.75% and the 30Yr can test 2.25% on the upside.
The German 2Yr (-0.65%), 5Yr (-0.59%), 10Yr (-0.36%) and 30Yr (0.16%) yields have moved further higher adding on to Tuesday’s gains.. The chances of seeing a fall-back again seems to be reducing. The 30Yr need to surpass 0.20% decisively to wipe out the bearishness completely. The 10Yr on the other hand has room to test -0.28% and -0.23% on the upside while it sustains above -0.40%.
The 10Yr GoI (6.5083%) sustains above the 6.50%-6.49% support zone. While above this support zone a rise to 6.5250% and 6.55% looks likely. However, a strong rise past 6.55% is needed to turn the outlook positive and negate the chances of seeing 6.45% on the downside. The RBI meeting outcome is due today where the central bank is expected to keep the rates unchanged.
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