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Market Morning Briefing: Dollar Yen Continues To Trade Below 110.50

STOCKS

Dow retains its strength and remains bullish while DAX has paused near a key resistance. Among the Asians, while the resistance in Nikkei has held well and keeps the near-term view negative, the Indian benchmark indices, the Sensex and the Nifty 50 has broken their respective resistances. Though the Indian indices looks bullish, RBI meeting outcome today will be crucial in deciding whether they can sustain the break or not.

Dow Jones (25,390.30,-21.22, -0.08%) extended its rally and is heading towards 25,600 as expected. As mentioned yesterday, a break above 25,600 can take it to 26,000.

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DAX (11,324.72, -43.26, -0.38%) has paused after a strong surge on Tuesday. The 100-day moving average at 11,368 is holding well as of now. While it continues to hold, a fall to 11,270 and 11,220 cannot be ruled out in the coming sessions.

Nikkei (20,723.65, -150.41, -0.72%) has come-off from its resistance at 21,000. It can extend its fall towards 20,600 and 20,500 in the coming days.

Sensex (36,975.23, +358.42, +0.98%) has risen above the crucial resistance level of 36,850. While above the 36,850-36,800 support zone, the outlook will remain bullish and a rally to 37,200 and 37,500 is possible in the coming days.

Nifty 50 (11,062.45, 128.10, 1.17%) has broken its resistance at 10,985. Resistance is at 11,084, a break above which will pave way for 11,200 and 11,250.

COMMODITIES

Strong dollar is keeping gold and silver under pressure while copper retains its strength. Oil looks mixed in the near-term within its broad sideways range movement.

Gold (1307) has failed to hold on to the bounce witnessed on Tuesday and has fallen sharply yesterday breaking below its support at 1308. It can now dip to 1303-1300.

Silver (15.67) fell as expected to test 15.60 yesterday. Next support is at 15.58 which can be tested in the near term. While this support holds, a bounce to 16 and 16.2 is possible again in the coming days.

Copper (2.82) has come-off slightly from a high of 2.84. The bullish outlook is intact for a test of 2.87 while it remains above 2.80.

Brent (62.31) and WTI (53.73) looks mixed in the near term. Brent has equal chances for a rise to 63.5-64 or a fall to 61-60 from current levels. A breakout on either side of 60 or 64 will decide the next move for Brent. WTI on the other hand can dip to 52 while it remains below 54.5.

FOREX

Dollar Index (96.43) has risen well and seems to break above the immediate trend resistance on the daily candles. While that sustains, a rise towards 97 is possible in the near term.

Euro (1.1361) has fallen as expected and could test 1.1350-1.1300 on the downside over the coming sessions. Immediate support is seen at 1.13 which if holds could produce a bounce back towards 1.15; else a break below 1.13 could open up chances of a further fall to 1.12.

Euro-Yen (124.81) could test 124.40-124.00 before bouncing again from there. Note that 126 on the upside is an important trend resistance that could hold in the medium term.

Dollar Yen (109.85) continues to trade below 110.50. While the immediate resistance at 110.50 holds, Dollar-Yen could test 109-108 on the downside before attempting to break above 110.50 in the near term.

Pound (1.2929) is falling in line with our expectations and could continue to fall towards 1.27. Aussie (0.7110) on the other hand is also looking bearish for the near term towards 0.70.

Dollar Rupee (71.5625) could trade in the 71.40-71.80 region. While the Indian equities hold strong and the 10YR GOI and Brent price sees a fall, Rupee strength could be on the cards for the near term. At the same time, strength in the Dollar Index could limit downside scope for Dollar-Rupee. Mixed factors could probably keep USDINR ranged for a few sessions within 71.80-71.40 region.

INTEREST RATES

The German yield differentials are heading towards support just below current levels and could bounce back from there. The 10-2yr (0.7160%) and 10-5yr (0.4670%) could bounce from support and head back towards 0.8% and 0.5% respectively in the near term.

The US yields are almost stable. The yields could see some more fall in the coming sessions before a bounce is seen. The 10Yr (2.69%) has scope of falling towards 2.65%.

The UK yields have dipped further. The 5Yr, 10Yr and 20Yr are trading at 0.86%, 1.1060% and 1.6480%, down from 0.8690%, 1.1160% and 1.649% respectively. There could be some more room on the downside for the next few sessions before the yields bounce back.

The Indian 10YR GOI (7.5653%) came off sharply yesterday. There is scope for it to bounce back towards 7.60/65% again while above 7.50/55%.

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