STOCKS
The movement in the equity segment will need a close watch this week. Dow has to sustain above 19000 to avoid a fall to 18000. However, we would be looking for it to bounce from 18000 as it is a strong support. DAX, Nifty and Sensex have bounced from their crucial supports and need to be seen if they can sustain higher. Nikkei is hovering above a crucial support. Shanghai has failed to hold on to Friday’s gains and can fall in the near-term before reversing higher.
Dow (19173.98, −913.21, -4.55%) has been oscillating between 19000 and 20500 over the last few days and has declined sharply within this range on Friday. The Dow Futures (18186, -854, -4.49%) is trading lower sharply indicating that the Dow can break below 19000. Such a break can drag it to 18000. However, as we have been mentioning for sometime 18000 is a strong support which we expect to hold well and trigger a bounce-back move to 20000-21000 again. We will have to wait watch.
As expected, DAX (8928.95, +318.52, 3.70%) witnessed a bounce to test the 9000-9200 region on Friday. However, the index still seems to be lacking momentum. It will have to be seen if it can rise past 9200 today in order to gain strength. Inability to breach 9200 can keep the DAX in a sideways range of 8200-9200 for sometime. A strong break below 8200 will be needed to bring back the danger of another fresh sell-off that can drag it to 7000.
Nikkei (16633.46, +80.63, +0.49%) is continuing to hover above the crucial support level of 16500. We will have to watch the price action closely. As we had mentioned last week, the index has to sustain above 16500 and also breach 17500 decisively in order to see levels of 18000 and higher. A break below 16500 on the other hand will bring the danger of seeing 15000-15000 on the downside.
Shanghai (2682.80, −62.81, -2.29%) has opened with a wide gap-down today failing to sustain the bounce-back move of Friday. This keeps alive the chances of seeing 2600-2560 on the downside first rather than a test of 2750-2775 on the upside that we had mentioned on Friday.
Sensex (29915.96, +1627.73, +5.75%) and Nifty (8745.45, +482, +5.83%) have seen corrective bounce on Friday in line with our expectation. It has to be seen if they can sustain this bounce today. 31000 on the Sensex and 9000 on Nifty are crucial levels to watch now. A strong rise past these hurdles can ease the downside pressure and will take the indices further higher to 33000-34000 (Sensex) and 9500-9700 (Nifty).
COMMODITIES
Commodities have fallen back from slight recovery seen on Friday and are expected to trade low in the near term. We would keep a watch on crucial supports below current levels.
Brent (25.78) and Nymex WTI (22.34) have dipped again to indicate that the hope for a possible reversal might still take some time. However, we may continue to look at immediate support near $23 and $20 on Brent and Nymex WTI respectively to hold in the near term.
Gold (1496.10) has moved up slightly to test 1500. While above support at 1460/50, there is hope of seeing a bounce back towards 1550/80 levels in the near term. Only a sustained break below 1450, if seen could indicate further bearishness going forward. We would watch price action from here in the next few sessions.
Silver (12.54) trades above 12 and while that holds, we may expect fair chances of seeing an upmove in the near term towards 14.
Copper (2.0450) had recovered to test 2.15/16 on the upside on Friday but has fallen back towards 2.04 now. We may see some trade in the broad 2.0-2.4 region for sometime now. Break on either side of this range will give some clarity on further direction for the medium to long term.
FOREX
Currency pairs remain under pressure but are mostly stable at levels seen on Friday. Aussie and Pound look bearish while Dollar Index has crucial resistance above current levels which if hold could take it down from current levels and pull up Euro in the near term. Dollar Yen has limited room on the upside till resistance near 112. EURJPY trades within a broad range. Yuan and Rupee are expected to trade weaker today.
Dollar Index (102.17) is holding below resistance at 103. Note that 103-104 is important resistance zone and while that holds, the index could be pushed down back towards 101-100 in the near term. The index could be sideways to bearish while below 103.
Euro (1.0727) is stable above support at 1.07 from where a bounce back to 1.0850 looks likely in the near term. We would keep a close watch on Dollar Index, which if falls from 103 could take Euro higher in the near term.
Dollar-Yen (110.10) is stable but continues to trade higher with some chances of rising towards resistance at 112 in the near term. If resistance near 112 holds, we may see a dip back towards 109 in the medium term.
EURJPY (118.08) is likely to trade in the 116-120 region in the near term but has been hovering in the middle of the range around 118. A movement on either side towards 116 or 120 looks possible.
Aussie (0.5751) is stable within the broad 0.55-0.66 region and is likely to trade in this range for some time. Note that 0.55 is a crucial support for the near term which has to hold to push back Aussie higher in the longer run.
Pound (1.14) looks bearish while below 1.20. A test of 1.10/11 is possible on a break below 1.14. Watch price action near 1.14.
USDCNY (7.0924) is trading higher and could rise back towards 7.10-7.12 mentioned on Friday before a possible corrective fall from there back towards 7.07/08 levels.
Outlook for USDINR (75.25) is bullish while above 74.70/75 and we may expect a further rise towards 75.50 in the near term. While the RBI is set to carry out the proposed USDINR buy/sell swap, concerns over Coronavirus and its spread has forced to put many parts of India into a lock down. While the NDF ate quotes at 75.36 just now we would have to watch if it moves higher to test 75.50 or comes down again to fall below 74.70/75 that has been holding as a decent support for the last few sessions.
INTEREST RATES
The US yields are under pressure again as the bounce-back seen over the last couple of weeks seems to have lost pace. The yields are likely to come-down further and retain their overall downtrend. The German Yields have reversed lower after testing their key resistances and are in danger of seeing a fresh fall. The 10Yr GoI has declined sharply on Friday thereby reducing the chances of seeing any further intermediate rise. The 10Yr GoI can fall further in the coming days.
The US 2Yr (0.29%), 5Yr (0.42%), 10Yr (0.84%) and 30Yr (1.42%) yields have declined further sharply across tenors on Friday. . The 10Yr has declined below 1% and one more attempt to test the 1.2%-1.3% resistance region that we had mentioned on Friday stands reduced now. While below 1%, the 10Yr can fall to 0.50%-0.40% again. The broader resistance region of 1.7%-2% region on the 30Yr has held well in line with our expectation. The 30Yr can now revisit 1.10% on the downside and can even fall below it.
The German 2Yr (-0.71%), 5Yr (-0.53%), 10Yr (-0.33%) and 30Yr (0.01%) yields have have come-off sharply across tenors. The recent upmove seems to be losing pace. The 10Yr has failed to see a sustained break of -0.20% and can fall to -0.40% and even lower while it remains below -0.20%. The 30Yr on the other hand seems to be struggling to sustain in the positive territory and can fall to -0.20% again if it declines below 0%.
The 10Yr GOI (6.2594%) has declined sharply on Friday. This has reduced the chances of seeing an extended upmove towards 6.50%-6.55% that we had mentioned on Friday. 6.40% itself can be a good resistance now and a test of 6.10% and 6% is possible in the near-term while the 10Yr GoI remains below 6.40%.
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