Market Morning Briefing: Dollar Yen Could Continue To Rise While Dollar Index Rises Towards 98

STOCKS

Most of the indices broadly remain bearish although there is room for an intermediate bounce in them. Shanghai is making a strong come-back after its long holiday and is outperforming other indicies.

Dow Jones (25,053.11, -53.22, -0.21%) is hovering above its key support level of 25,000. Near-term resistance is at 25,100. While it holds, the Dow can break below 25,000 and test 24,900 in the coming sessions.

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DAX (11,014.59, +107.81, +0.99%) bounced-back but has resistance near 11,100 which can restrict the upisde. While below 11,100, the outlook will remain negative for the DAX to test 10,800 and 10,700.

Shanghai (2,654.03, +0.14, +0.01%) has risen breaking the resistance at 2,635. The upmove can extend to test 2,675 and 2,700 in the coming days.

Sensex (36,395.03, -151.45, -0.41%), and the Nifty 50 (10,888.80, -54.80, -0.50%) extended the fall as expected to test their respective support levels of 36,280 and 10,850 respectively. While these supports hold, a near-term intermediate bounce to 36,850 on the Sensex and 10,985 on the Nifty cannot be ruled out. However, the indices will come under pressure if they break below these supports. Sensex can fall to 36,000-35,985 on a break below 36,280. Nifty 50 on the other hand can test 10,815-10,800 on a break below 10,850

COMMODITIES

Strong dollar keeps gold, silver and copper under pressure. While gold and silver can remains range bound with an overall bullish bias, copper has room for further corrective dip before we see a bounce. Oil remains mixed and can remain in a broad sideways range for some time before a clear trend emerges.

Gold (1,308) has come-off sharply yesterday, but is managing to hold above 1,300. A range bound move between 1,300 and 1,325 is possible before we see a fresh rally towards 1,350-1,360.

Silver (15.70) is hovering above the key 15.60-15.55 support region. While this support holds, a bounce to 16 and 16.2 cannot be ruled out in the coming days. But, a break below 15.55 can drag silver lower to 15.1 and 15.

Copper (2.79) fell as expected yesterday to test 2.78. While below 2.82, the corrective fall can extend towards 2.76 and 2.75 before the overall uptrend resumes.

WTI (52.40) has bounced after testing a low of 51.25. While it remains above 52, a bounce to 53.5 is possible in the coming sessions.

Brent (61.65) is stuck in a narrow range between 61 and 63 over the last one week. The near-term view is negative for it to break below 61 and test 60. Broadly, WTI is likely to remain sideways between 60 and 64.

FOREX

Fresh strength in dollar Index above 97 could lead to weakness in the major currencies for the near term. Currency pairs are trading near important resistance and support levels but could remain weak against the Dollar for the next few sessions.

Dollar Index (97.04) has broken above the immediate resistance at 97 and while the index trades higher and manages to sustain above 97, we may look for a rise towards upper resistance at 98 as seen on the 3-day and weekly charts.

Euro (1.1281) has also clearly broken below 1.13. Unless the break is temporary and the Euro bounces back above 1.13 today itself, we look for bearishness and the fall to continue towards 1.11. Below 1.13, there is scope for a fall to 1.11 in the near term.

Euro-Yen (124.64) bounced slightly yesterday and while the near term support at 124.40/20 holds, we could see a rise towards 126 in the near term. Break below 124.40/20 could take it down to 123.70/60 but we are not looking at a sharp fall below 123.60 in the medium term. Rather a rise towards 126 is preferred for now.

Dollar Yen (110.48) could continue to rise while Dollar Index rises towards 98. Although 110.50 is an immediate resistance on the daily candles, a break on the upside could take it higher towards 111.50 from where a corrective fall could be seen. Near term looks bullish.

Pound (1.2868) could get some support near 1.2850 leading to a rise towards 1.29/30 again. But a failure to bounce from 1.2850 could take Pound to 1.26 in the near term.

Aussie (0.7082) has seen a slight bounce but could trade sideways in the 0.70-0.71 region for sometime before rising towards 0.72 again.

USDCNY (6.7843) has 21-day Ma near 6.8040 which could act as a decent resistance just now and push the pair back towards 6.70. A break above 6.8040 could take it higher towards 6.81 from where a short corrective dip is possible. Overall the current rise could be limited to 6.8040-6.8100 in the near term before a dip is seen.

Dollar Rupee (71.1750) could test 71.00 on the downside while below 71.40/30. Although some of the EM currencies look weak against the Dollar just now, Rupee could also see some weakness but may be limited to 71.40. Overall trade within 71.00-71.40 is likely just now.

INTEREST RATES

The US yields have risen slightly. The 2Yr (2.50%), 5Yr (2.49%), 10Yr (2.67%) and 30Yr (3.01%) have risen from 2.48%, 2.46%, 2.65% and 2.99% respectively. Some more rise is possible in the near term before falling off in the medium term. While the US Dollar strengthens a bit, US yields could see a rise for the next few sessions.

The German-US 2Yr differential (-3.07%) tested immediate resistance and has fallen from there. While the yield differential could come down towards -3.10%, near term looks bearish.

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