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Market Morning Briefing: USDCNY Fell Sharply From 6.69

STOCKS

The rally in the global equities seems to have halted. A near-term correction is on the cards on the back of profit-booking. The increased geopolitical tensions between India and Pakistan keeps the Asian equities under pressure which are trading in the red today following the fall in the US equities overnight.

Dow Jones (25,985.16, -72.82, -0.28%) has declined below the psychological level of 26,000 and looks vulnerable for a fall to 25,750 in the coming days.

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DAX (11,487.33, -53.46, -0.46%) remains range-bound between 11,440 and 11,560 over the last few days. While above 11,440, an upmove to 11,700-11,750 is likely. But, a break below 11,440 can drag the index lower to 11,350-11,300 before we see the above-mentioned rally.

Nikkei (21,481.66, -74.85, -0.35%) has failed to breach the 100-day moving average resistance at 21,555. A dip to 21,300 can be seen in the coming sessions.

Shanghai (2,943.42, -10.40, +0.35%) is facing strong resistance around the psychological level of 3,000. This keeps the possibility high of a corrective fall to 2900 or even lower in the near term.

Sensex (35,905.43, -68.28, -0.19%) and Nifty 50 (10,806.65, -28.65, -0.26%) failed to hold on to the opening gains and fell to close in the red yesterday on the back of geo-political tensions. The trendline supports at 10,750 on the Nifty and 35,730 on the Sensex are the crucial levels to watch which are holding well as of now. While above these supports, Sensex can rise to 36,450 and Nifty can test 10,980 in the near term. Bur a break below 10,750 can drag Nifty to 10,680 or 10,620. Sensex can fall to 35,435 on a break below 35,730.

COMMODITIES

Copper regains strength and retains the bullish outlook. Gold and Silver can see an intermediate dip within its overall uptrend. Oil is getting support from the draw-down in the inventory after the data release yesterday.

Gold (1318) has declined below 1320 and can fall to 1310 on a break below 1315. The levels of 1310 and 1300 are strong supports which are likely to halt the fall and a bounce-back to 1330-1340 is possible again. Silver (15.72) can dip to 15.6-15.55 in the near term and then can bounce to 15.8-16 again.

Copper (2.96) has bounced from around 2.93. The bullish outlook is intact for a test of 3.0-3.02 in the coming days.

Brent (66.25) can move further higher to test 67.5 in the coming sessions. A range-bound move between 64 and 68 can be seen for some time. The strong bounce from around 64 this week retains the bias bullish for an eventual break and rise above 68 targeting 70. WTI (56.8) can test 57.5-58 in the near term

FOREX

FED chairman Jerome Powell reiterated the central bank’s cautious stance on the monetary policy no leading to any major movement in the currency sector.

Dollar-Index (96.09) near term charts indicates enough room on the downside towards 95.25-95.00 levels. Trading in the middle of the broad 97-95 region, the index could test 95 before again rising back towards 97.
Euro (1.1378) tested 1.14 yesterday before coming off from there. While 1.1450-1.14 holds, euro looks bearish towards 1.1350-1.1320 immediately. However, on the medium term there is room for a fall towards 1.12/11. If Dolar Index moves down to 95, Euro could re-test 1.1450/1.15 levels soon.

Euro-Yen (126.14) has clearly broken above 126 and is now headed towards upper resistance near 126.80-127.00 from where a small dip is possible back towards 125.20.

Dollar Yen (110.86) has scope to rise towards 112 while above 110.50. But stuck within the narrow region of 110.5-111.50 we could see some more of ranged movement before a break on either side is seen. Note 112 is an important near term resistance.

Pound (1.3303) has risen sharply on possibility of delay to the 29 March Brexit deadline. Currently the strongest performed amongst the major currencies; Pound could continue to move up in the near term. The weekly line chart shows a possibility of rising towards 1.36.

Aussie (0.7141) could test support at 0.71 followed by a rise towards 0.72-0.7250. Overall near term trade within 0.7250-0.71 is likely to continue for a few more sessions.

USDCNY (6.6806) fell sharply from 6.69. It could test 6.62 on the downside (while below 6.69) before again bouncing back towards 6.70/72 levels.

Dollar Rupee (71.23) is likely to trade within 71.0-71.50. While preference is for a re-test of 70.80, we are cautious on a rise towards upper resistance near 71.85. The pair rose to our expected 71.50 yesterday pulled up by the news of air strikes between India and Pakistan. We may expect 70.80; but any adverse news from the Indo-Pak tensions could immediately lead to a sharp rise in Dollar-Rupee in the near to medium term. We do not see strength below 70.80 just now.

INTEREST RATES

Powell’s comments indicated that the central bank would soon announce end of the runoff assets from its $4 trln balance sheet in its March meeting.

The US yields have risen. The 5Yr (2.47%), 10Yr (2.68%) and 30Yr (3.06%) are up from 2.45%, 2.64% and 3.02% respectively but could see a pause near 2.5%, 2.70% and 3.1% on the upside.

The US-JGB 10Yr (2.70%) rose contrary to our expectation of a fall towards 2.70%. Unless a sustained rise above 2.70% is seen the spread could fall back towards 2.65/60% in the longer run. We keep a close watch on this.

The UK-US 10YR (-1.53%) has risen as expected and could move higher to test -1.50% in the near term.

The German-US 10YR (-2.53%) has dipped a bit from immediate resistance and if that holds, the spread could come off -2.55% or lower in the near term.

The 10Yr GOI (7.6722%) tested immediate resistance near 6.70% yesterday before closing slightly lower. While 6.70% holds, the yield could come off to test 7.60-7.55% again in the near term. Else a rise above 7.7125% is needed to indicate further bullishness for the medium term.

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