Market Morning Briefing: Aussie Has Risen As Expected And Could Test 0.6775

STOCKS

Equities seem to lack strength to move sharply higher. As mentioned yesterday the segment is not convincingly looking strong as the increasing reported number of corona virus cases weigh on the sentiment. Dow has room to rise in the near-term to test its crucial resistance and is likely to see a sharp corrective fall going forward. DAX is relatively bullish than others in the lot. Nikkei is struggling to gather momentum and could fall within its broad sideways range. Shanghai has to rise past a key resistance to move further higher and avoid a fall-back move. Sensex and Nifty have to hold above their key near-term supports to keep alive the possibilities of seeing further rise.

Dow (29423.31, −128.11, -0.43%) has failed to sustain above 29500 and has come-off slightly. Support is in the 29200-29150 and then at 29000. The index may consolidate between 29000 and 29500 for some time with high chances of seeing a rise to 29750-30000 in the near-term. But there after we expect a sharp corrective fall from around 30000 in the coming weeks.

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DAX (13745.43, −4.35, -0.03%) has bounced well from the low of 13576 yesterday. The price action on the daily chart leaves the chances high of seeing a break above 13800 and a rise to 14000 and even higher levels while above 13600. A break below 13600 on the other hand will negate the bullish view mentioned above and will drag the index lower to 13400-13200 again.

Nikkei (23698.93, −128.80 -0.54%) continues to trade lower below 24000. A key near-term support is at 23600. A break below it can drag the Nikkei lower to 23400 initially and then to 23000 eventually. For now the broader 22800-24140 sideways range is still intact.

Shanghai (2915.56, +9.49, +0.33%) is managing to hold above 2900 but will need a strong rise past 2950 to keep the current upmove intact. While below 2950, fall to 2875-2850 again cannot be ruled out. A break below 2900 can trigger this fall.

Nifty (12174.65, -26.55, -0.22%) has come-off yesterday and can test 12100 while it remains below 12200. However, a strong fall below 12100 is needed to completely negate the chances of seeing a rise to 12400-12500 that we had mentioned yesterday. We will have to watch the price action around 12100 closely today.

Sensex (41459.79, -106.11, -0.26%) on the other hand has cluster of supports in the broad 41400-41000 region. A break below 41400 will see a fall to 41200 and 41000 which in turn could delay our preferred rise to 42000-42200 that we had mentioned yesterday. However, a strong fall below 41000 is needed to completely negate it.

COMMODITIES

Overall commodities trade higher. Crude prices have moved up but Brent seems to have risen sharply as compared to WTI. Gold and Silver looks mildly bullish. Copper could rise towards 2.65.

Brent (56.24) has moved up sharply as compared to Nymex WTI (51.39). Brent could test 58 or higher within the current upmove in the near term while WTI could also move up towards 54. WE may now expect a decent rally in crude prices in the coming weeks, recovering the sharp fall seen through Jan’20.

Gold (1578.60) has not been able to fall below 1560 and has been trading in the 1560-1585 region for quite sometime now. 1560-1590 is now the near term trade zone that could hold for some more sessions.

Silver (17.65) traded briefly below 17.50 yesterday but has bounced back from there unable to sustain below 17.50. While above 17.50, Silver could attempt a rise towards 18.00-18.25 in the near term else could be vulnerable to a sharper fall going forward.

Copper (2.6090) trades within the 2.50-2.65 region and is likely to hold within this range for the near term.

FOREX

Strong rise in Dollar Index has not been able to pull up Dollar Yen possibly indicating upcoming bearishness in USDJPY while Euro has been dragged lower and could fall some more to test crucial support levels. Pound has moved up but needs to sustain above current levels to turn further bullish in the near term. Aussie looks mixed. Rupee could re-test 71.50 but is likely to see ranged trade.

US Dollar Index (99.12) has continued to move up and could reverse from anywhere within 99-100 region in the coming sessions. Only a sharp rise above 100 would negate our expected rejection back towards 98 or lower.

Euro (1.0836) has fallen further and while the Dollar Index continues to rise further, we may expect a test of 1.08 before a bounce from there is seen.

Dollar-Yen (109.86) is stable as usual below 110 despite the strong rally in Dollar Index. Immediate resistance near 110-110.50 is likely to hold to produce a last leg of fall towards 108 or lower before a rise again is expected in the longer run.

EURJPY (119.06) has fallen towards 119 as expected and could continue lower towards 118-117 in the medium term if it fails to bounce from 119.

Pound (1.3045) has moved up and needs to sustain above 1.30 in order to move up towards 1.32.

Aussie (0.6726) has risen as expected and could test 0.6775. A rejection from 0.6775 could bring it down again towards 0.6675-0.6650 in the near term. A sharp break above immediate resistance is needed to turn bullish for the medium term.

USDCNY (6.9809) is trying to move up towards the upper limit of the 6.95-6.99 region mentioned yesterday.

USDINR (71.2990) did test 71.50 yesterday but came off sharply indicating that 71.50 is a decent resistance in the near term. A fall below 71.030 today could take the pair down towards 71.20 but there could be chances of re-testing 71.40/50 again in the next 1-2 sessions.

INTEREST RATES

The US Treasury yields remain stable and seem to lack strength for a strong rise. The increasing number of corona virus cases is weighing on the markets. Though the possibility of a rise in the US Treasury yields in the short-term cannot be ruled out, we will have to wait and see for a few sessions to get a clear cue. The German yields also remain stable and mixed. It will have to be seen if they can sustain above their key near-term supports to keep the chances alive of seeing a rise in the coming days. The resistance on the 10Yr GoI has held very well in line with our expectation and the broader bearish view remains intact.

The US 2Yr (1.43%), 5Yr (1.43%), 10Yr (1.60%) and 30Yr (2.06%) Treasury yields continue to trade stable and keep the near-term outlook mixed. A sharp fall below 1.60% on the 10Yr will negate the chances of a rise to 1.72% and will drag it again lower to 1.50%. Similarly, the 30Yr has to sustain above 2% to keep the chances alive of seeing a rise to 2.20%. We will have to wait and watch the movement for some time to get a clear cue.

The German 2Yr (-0.66%), 5Yr (-0.60%), 10Yr (-0.39%) and 30Yr (0.13%) remained stable across tenors. . The near-term view is mixed. Our view remains the same. The 10Yr has to sustain above -0.40% to see a rise to -0.30% and 0.20% and avoid a fall to -0.50%. The 30Yr has a crucial support at -0.08% which needs to holds to avoid a fall to 0%. On the other hand, a strong rise past 0.20% is needed for the 30Yr to gain bullishness.

As expected, the 10Yr GoI (6.4263%) tested 6.50% on the upside and has come-off sharply from there, a much faster fall-back move than we had anticipated. The broader bearish view is intact. A test of 6.37%-6.35% is possible on a break below 6.40%. While above 6.40%, a sideways consolidation between 6.40% and 6.50%/6.53% is possible for some time before our preferred fall happens.