Market Morning Briefing: Aussie Is Likely To Trade Below 0.6775

STOCKS

Equities continue to trade higher and broadly remain bullish. Dow can gain further momentum to move higher on a break above 29400-29500. DAX is moving higher in line with our expectation and can test a key resistance in the coming days. Shanghai is recovering well and can move further higher in the coming days. Nikkei has come closer to its crucial range resistance and needs a close watch to see if it can break the range on the upside or not. Sensex and Nifty have a key resistance ahead which needs to be broken in order to wipe out the chances of seeing a fall-back again.

Dow (29379.77, +88.92, +0.30%) is holding higher and is keeping our bullish view intact. As mentioned yesterday, a rise to 29750 and 30000 can be seen now. A strong break above 29400-29500 can accelerate the upmove. Immediate support is at 29250 and then the next strong support is at 29000.

DAX (13574.82, +96.49, +0.72%) has risen further in line with our expectation and keeps our bullish view intact. As mentioned yesterday, the current upmove can extend up to 13750 on a break above 13600. Support is at 13400. The region between 13750 and 13780 is a key resistance which will need a watch.

Nikkei (23839.16, −34.43, -0.14%) has come closer to its crucial range resistance. 24120-24140 is a crucial resistance region that needs a close watch now. A strong rise past 24140 will ave way for 25000. But, inability to breach this resistance zone will keep the 22800-24140 sideways range intact and can drag the Nikkei lower going forward.

As expected Shanghai (2863.87, −2.64, -0.09%) has risen to test 2875 on the upside yesterday. The near-term outlook is bullish. A further rise to 2900 and 2925 looks likely in the near-term. 2850 is an immediate support and the 2820-2800 is slightly a deeper support available for the index.

As expected Nifty (12137.95, +48.80, +0.40%) tested 12165 yesterday but did not break above it and has closed on a mixed note. 12165 and 12200 are crucial levels to watch. Nifty has to breach 12200 decisively to revisit 12400 levels and also to avoid a fall-back to 11900. We will have to wait and watch the price action today.

Sensex (41306.03, +163.37, +0.40%) is finding resistance in the 41400-41500 region as expected. As mentioned yesterday, a strong rise past 41500 is needed to boost the momentum and revisit 42000-42200 levels. Inability to breach 41500 can drag the Sensex lower to test the key support region of 40800-40700.

COMMODITIES

Gold and Silver trade higher despite the strength in US Dollar. But we may expect upper resistances to hold just now and produce a rejection in the medium term. Crude prices have dipped slightly but while above support levels; we may look for some more upmove in the coming sessions. Copper is likely to be stable just now with potential bullishness in the medium term.

Gold (1570) and Silver (17.79) have moved up again. But we continue to watch supports near 1540 and 17.50 and resistances near 1580-1600 and 18.50-18.75 on Gold and Silver respectively. We may expect trade above the mentioned supports while the metals may head higher to test respective upside resistances in the near term.

Brent (55.32) and Nymex WTI (51.31) have dipped slightly but while above immediate supports of 54 and 50, Crude prices look bullish for the near term targeting 58 and 55.50-56.00 respectively.

Copper (2.5915) tested 2.625 before coming off sharply from there. 2.625 could be an immediate resistance which if holds could keep Copper stable in the 2.625-2.50 region for some more sessions.

FOREX

The RBI kept repo rate unchanged yesterday but indicated that there would be some room for rate reduction. Important US data releases today (NFP, Unemployment, Labour data) could be important that could bring in fresh trades in Dollar Index. For now a stronger Dollar has pulled down Euro further and Yen further. Pound looks weak while Aussie and Rupee are ranged.

US Dollar Index (98.43) is trading higher. It would be important to see if it manages to rise above 98.50 or faces stiff rejection from there to fall back towards 97.50 or lower in the medium term. As mentioned yesterday, a rise above 98.50 would keep the upward channel intact as seen on the weekly candles. Important data releases are due today which could bring in fresh trades latter during the day.

Euro (1.0983) trades lower on further strength in Dollar Index. A dip below 1.0960 would trigger a fall towards 1.0940-1.0924 in the near term.

Dollar-Yen (109.91) is trading higher and could test 110.5, an immediate resistance on the upside. 110.5 is likely to hold and produce a decent dip in the medium term.

EURJPY (120.74) tested 121.18 but has come off thereafter. Medium term looks bearish towards 119 but we may expect some trade between 121.30-120.50 in the near term.

Pound (1.2942) has moved lower falling below our mentioned 1.2950. A further dip towards 1.29 or even lower cannot be negated.

Aussie (0.6716) is likely to trade below 0.6775 and could fall towards 0.67 again in the near term. Some ranged trade between 0.67-0.6775 could be expected just now.

USDCNY (6.9817) is likely to trade below 7 in the near term with a possible range-trade between 7.00-6.95 region.

USDINR (71.20) looks ranged in the 71.30-71.08 region with a 10p extension possible on either side of the mentioned range. A break on the upside would take in more bias if the Dollar index rises past 98.50.

INTEREST RATES

While the US and German yields are managing to hold on to their recent bounce-back move, India’s 10Yr GoI witnessed a sharp fall yesterday. The Reserve Bank of India announcing a Long Term Repo Operation in its policy meeting yesterday had triggered this fall. The outlook for the 10Yr GoI is bearish and the yield can fall further. The German and the US yields on the other hand are managing to hold higher. While the US yields have room to move further up, the German yields will need a close watch to see if it can hold on to the recent gains.

The US 2Yr (1.43%), 5Yr (1.45%), 10Yr (1.63%) and 30Yr (2.10%) Treasury yields have dipped slightly but remain bullish. . While above 2%, the 30Yr can rise to 2.25%. Similarly, while the 10Yr sustains above 1.50%, a test of 1.75% and 1.80% on the upside is possible.

The German 2Yr (-0.64%), 5Yr (-0.59%), 10Yr (-0.37%) and 30Yr (0.15%) yields remain stable… As mentioned yesterday, the 10Yr can rise to -0.28% and -0.23% while it sustains above -0.40%. The 30Yr on the other hand has to breach 0.20% in order to gain momentum and also to negate completely any chances of seeing a fall-back again. The German yields will need a close watch in the coming days.

The 10Yr GoI (6.4484%) has declined sharply below 6.49% to test 6.45% yesterday rather than rising to 6.525%-6.55%. RBI’s Long Term Repo Operation (LTRO) announcement had triggered this sharp fall. The outlook is bearish and a fall to 6.41%-6.40% is possible after which a bounce can be seen. The broader picture has turned negative and a fall to even 6.35% looks possible from a medium-term perspective.