The Dow has rebounded strongly over 23,000 yesterday. It may remain in the 23000-24500 (narrow) or 22500-25000 (wider) range for a few weeks. DAX looks vulnerable to breaking under its crucial support and falling further. Nikkei has dipped under its middle support and will now have room to fall further in the short term. The corrective fall in Shanghai is happening as expected. The index may move down to test its supports in the coming days, from which it may turn higher again. Sensex and Nifty have come closer to their crucial support levels of 31000 and 9000 respectively. We expect these supports to hold and keep the indexes in a lateral range. The price action today needs close monitoring.
Contrary to our expectation, the Dow (23625.34, +377.37, + 1.62%) has come back strongly from made in 22789 yesterday. It remains to be seen if it can break 24000 to move higher towards 24500 in the short term. On the whole, we might be looking at a range of 23000-24500 (narrow) or 22500-25000 (wider) for some time now.
DAX (10337.02, −205.64, -1.95%) fell below the decisive support level of 10200, but has managed to decline. However, on the charts, bias is negative as the index looks vulnerable to breaches below 10200. Such a break could pull the DAX lower to 10000 initially and even 9600-9500 eventually. We’ll have to wait and see to see if the index manages to hold above 10200 and keep the 10200-11000 range or not.
Nikkei (19849.86, −64.92, -0.33%) has fallen below 20000. While below 20000, a further fall to 19500 and even 19000 is possible in the short term. The chances of an increase to 21500-22000, which we have mentioned for some time, are now reduced.
As expected, Shanghai (2867.50, -2.84, -0.09%) has fallen below 2875. Our view of seeing a correction decline to 2850 and even lower to 2825 remains intact. We expect Shanghai to resume its trend from around 2825 to 2925-2950 eventually. The medium term bullish view of looking 3050 upside down remains intact.
The Sensex (31122.89, -885.72, -2.77%) is well below 32000 as expected and has now come closer to the crucial support level of 31000. As mentioned yesterday, 31000 is an important support that we expect to keep and keep the index in the range of 31000-33000. A strong fracture below 31000 (less preferred) can pull it to 30000-29000.
Nifty (9142.75, -240.80, -2.57%) broke below the 9300-9275 support zone that we expected to have. A test of 9000 is likely now. Nifty necessarily has to stay above 9000 to keep our preferred range of 9000-9400 / 9500 intact. A break below 9000 (less preferred) can pull it lower to 8500. We must closely follow the 9000 level now.
The IEA’s monthly energy report released yesterday appears to have brought some good news for crude prices that have pulled them up. The IEA has revised its growth in demand, which has fallen by 8.6 mln bpd compared to its previous forecast of 9.2 mln bpd; This is because the agency says it can see signs of possible rebalancing in the oil markets. The agency also expects massive production cuts to non-OPEC countries where the US is likely to decline most, with approx. 2.8 mln bpd compared to 2019.
Crude prices are trading higher and could soon test our aforementioned immediate resistance to daylight. Gold and silver have risen sharply and look bullish right now. On the other hand, copper trades a little lower and may fall further, while the resistance at 2.40 holds well.
Brent (31.30) and Nymex WTI (27.85) have moved up after the IEA released its monthly energy report yesterday and continue trading higher today. In line with our expectations, Brent and WTI are both moving up to our expected $ 32.50 and $ 29, which could be tested in early sessions next week. Then we can either see a short dip or a break on the head to indicate further medium term habilitation. After the initial test of the said levels, we will wait to see the price measure for further confirmation.
Gold (1743.70) has risen sharply, indicating a short-term increase while maintaining an increase over 1740. A test of 1760 / 80-1800 would be left on the cards next week, while gold remains above 1740. Only one sharp fall back to 1700 could lapse further rise from here.
Silver (16.40) has also risen sharply to almost test near-sight resistance at 16.5. However, we will have to look at price measures near 16.50 to see if the price faces rejection from it or manages to move upwards. A break above 16.50 can be seen to start fresh rise for Silver.
Copper (2.3645) holds well under resistance at 2.40 as seen on the 3-day candles. 2.25-2.40 may be trading in the next 1-2 weeks before the price has to decide further direction from this.
Dollar index trades higher, but has also pulled Euro and Dollar-Yen together. The Aussie can move higher while the pound looks weak right now. The yuan is weakening and may also try to take USDINR higher. Generally mixed movements in currency pairs seen now with near-term resistance and supports are likely to hold up well.
The dollar index (100.33) is up slightly and is nearing resistance at 100.5. As mentioned earlier, we have to wait to see if a fall from 100.5 brings the index back to 99 again in the coming week.
The Euro (1.0802) looks bullish for the near to medium term, while we do not expect a fall below 1.0750 or 1.07 maximum. But the dollar index shows no sign of weakness, which keeps the Euro fluctuating in the 1.07-1.09 range broadly. Preference is to see a bullish euro from here, but we will have to wait for price confirmation in the short term.
Dollar-Yen (107.25) moved up against our expectation of a fall to 106. But even if the resistance near 100.5 holds the Dollar Index, we would be careful to see a rebound to levels below 107 in the coming week . We do not completely exclude a test of 106, but may look for a dip while it is below 107.50. A fall in Nikkei (see the equity section above) may also indicate some bearishness for Dollar-Yen in the near term.
EURJPY (115.91) traded slightly higher and below 117 there is room for a test of 114 before again seeing a sharp bounce from there.
The Aussie (0.6453) is trading much higher, and while the near-term support zone of 0.6350-0.64 holds, there is a likelihood of a recovery from current levels. The overall broad range of 0.6350-0.66 could accommodate in the medium term.
Pound (1.2209) is down to test our expected 1.22 / 21 in the short term. There is a further fall towards 1.21 before a sharp mid-term withdrawal is seen.
USDCNY (7.1005) has risen as expected and looks bullish for some more rise to 7.12 in the short term before facing rejection from it.
USDINR (75.5650) was trading well within our mentioned range of 75.30-75.60 yesterday, against rejection from 75.60. Note that while immediate resistance is seen 75.60, there may be chances of breaking higher, especially when the Yuan is weakened. However, we will look at resistances near 75.75 / 80 and above at 76 to hold in the short term if the pair manages to break above 75.60 today. In the medium term, bearish looks but before it is possible to trade between the sides.
The US Treasury yield continues to trade lower, keeping our bearish perception intact. The yields can be further dipped to test their intermediate supports. While these support hold, Treasury yields may remain within range before we see a new fall leg. German yields remain lower and can dip to test their supports in the short term. While these supports may hold for the time being, we expect dividends to eventually fall below those supports. 10-year-old GoI has jumped in line with our expectation after testing the key support zone yesterday. 10Yr GoI can move up in the coming days.
US 2Yr (0.11%) and 5Yr (0.31%) Treasury rates remain lower but stable, while yields at the extreme end, 10Yr (0.62%) and 30Yr (1.31%) dipped further in line with our expectation. The bearish outlook is intact. 10Yr is heading towards the support range 0.60% -0.58% as expected. A break below 0.58% increases the downside pressure and pulls it to 0.40% in the coming days. In the event that 10Yr manages to hold above 0.58%, it can then continue trading in the 0.58% -0.70% lateral range. 30-year-olds have room to test 1.23% -1.20% in the short term.
The German 2Yr (-0.76%), 5Yr (-0.75%), 10Yr (-0.55%) and 30Yr (-0.12%) yields continue to trade lower. As mentioned yesterday, the chances of a short-term increase we saw were reduced. We expect 10Yr to be low to test -0.60% and 30Yr to dip to -0.20% from current levels. Whether or not the yield breaks below -0.60% (10Yr) and -0.20% (30Yr) will determine the next movement part. We prefer that 10Yr and 30Yr break below -0.60% and -0.20% eventually, if not immediately.
10Yr GoI (6.0655%) fell as expected to test 6% yesterday and has jumped from the low level of 5.99%. The support zone 6% -5.95% is likely to mitigate the downside and we will be looking for an increase to 6.15% -6.20% in the coming days