Market Morning Briefing: Dollar-Yen Has Fallen Along With The Dip In Dollar Index

STOCKS

Profit taking seen on equity sectors across the globe and with a dip seen in Dow, we may expect a dip in Asia-Pac equities too today.

The profit-taking we have been talking of seems to have come in a little earlier than expected as the Dow (25706.09, -361.19, -1.39%) fell to a low of 25523.51, and has closed below the support at 25750 mentioned yesterday. This turns the focus to 25000 in the near term, instead of 27000 and 28000 on the upside.

This can impact other indices also and trigger profit-taking across the globe.

DAX (12489.46, 5.35, -0.043%) has dipped slightly but continues to hold above support at 12400 and while the support holds we may not negate a bounce towards 13200 mentioned yesterday. The expected bounce could be delayed if the index dips from here in the next couple of sessions.

The Nikkei (22472.77, -58.52, -0.26%) is trading lower today as resistance near 23000 continues to hold.
We may expect a corrective dip for the next 1-2 sessions before a rise back towards 24000, from where we can see deeper profit-taking in the longer run.

Shanghai (3406.25, -44.34, -1.29%) has dipped too after a decent rise seen yesterday as cautioned. We continue to see profit taking while resistance near 3450-3500 holds.

In line with other equities, Nifty (10813.45, +107.70, +1.01%) and Sensex (36737.69, +408.68, +1.12%) could see some profit taking too that we were expecting yesterday and look for a dip to 10600-400 and 36000 respectively before the rally resumes towards 11000 and 38000.

COMMODITIES

After recent rise seen in commodities, especially metals we may not expect some decline in the near term as concerns and fears of rising Covid cases in US and some other parts of the world could impact demand for metals and impact crude supplies. Any talks of a second lockdown, if seen could lead to a corrective decline in all commodities.

Brent (42.16) and WTI (39.38) have dipped and could test respective supports near 42 and 39 respectively. The overall uptrend will persist if and while these hold, and if so we can target 50 (Brent) and 45 (WTI). However we have to be careful because if the Supports break, it may trigger a deeper correction turning our outlook bearish for the near to medium term.

Gold (1806.70) and Silver (19.03) have dipped too from higher levels seen yesterday. Gold is holding below 1820/30 just now and could dip towards 1800-1790 on the downside before again picking up momentum to rise towards 1850/60 in the medium term. While above 1780, we do not negate the possible upside. Silver on the other hand needs to break below 18.5 to initiate a sharp fall else it could continue to move back towards 19.5 and even 20 in the longer run.

Copper (2.84) is up slightly. While above 2.81/82 we expect further bullishness towards 2.90 before a sharper dip is seen. The next resistance above 2.82 is seen at 2.90 now.

FOREX

Dollar Index has risen dragging down Euro, Pound, Aussie and EURJPY. Yuan trades weak and could range in the 7.0-7.03 region. USDINR is also expected to open with a gap up and move higher in the near term.

Dollar Index (96.87) has managed to bounce from 96.24 and could rise towards 97.30 in the near term before seeing another dip. Failure to dip from 97.30 could take it higher towards 97.50-97.80 on the upside. As such the other currencies could weaken a bit in the next few sessions.

Euro (1.1274) was unable to sustain above 1.1350 yesterday and has fallen back. We would keep a watch on whether Euro breaks below immediate support near 1.1270/60 to head towards 1.1220 or bounces back from current levels to re-test 1.13 and higher.

EURJPY (120.68) has fallen as resistance at 122 is holding well. While the fall continues, we may see a test of 120 or even lower in the coming week.

Dollar-Yen (107.31) has fallen along with the dip in Dollar index. While the correlation remains strong, USDJPY could trade below 108 and could head towards 107 or lower in the near term. View is bearish for the near term.

Aussie (0.6942) has dipped slightly and if it fails to bounce from here itself, we may expect a test of 0.69-0.68 in the near term before a further rise is seen. But with a higher Copper price, Aussie may get some boost to rise in the near term.

Pound (1.2589) has dipped too from 1.2670 and could see a corrective dip towards 1.2527 before rallying back to 1.2715-1.2730 mentioned yesterday.

USDCNY (7.006) has bounced back too from 6.98 and has scope to test 7.02-7.03 in the near term. We will keep a close watch to see if the break below 7 was a false break or the currency pair still has some scope to head lower. For today, trade above 7 is expected to hold.

USDINR (74.9350) could open with a gap up and trade higher as currencies across the globe trade weak against the US Dollar. With weakness seen in Euro and Yuan, we may expect Rupee to trade weak over the next 1-2 sessions. A break above 75.10 could take it towards 75.20/25 in the near term.

INTEREST RATES

The US Treasury and German yields have dipped sharply. While the US yields could be further bearish, German yields can rise from immediate supports. Else the German yields could also be dragged lower in the near term. The 10Yr GOI has support near 5.75% which if holds could see a bounce soon.

The US 2Yr (0.15%), the 5Yr (0.29%), 10Yr (0.62%) and the 30Yr (1.32%) have dipped sharply and could be headed towards near term supports as expected. We retain our view of seeing a dip to test the supports at 0.60%-0.58% on the 10Yr and 1.30%-1.25% on the 30Yr. View is bearish for the near term.

The German 2Yr (-0.679%), 5Yr (-0.682%), 10Yr (-0.46%) and the 30Yr (-0.037%) yields have all fallen sharply but have immediate supports near current levels which if hold could possibly lead to a short bounce in the near term. Failure to rise from respective supports could drag the yields lower.

The 10Yr GOI (5.7726%) may move up towards 5.80% while above 5.75%. Overall range of 5.75-5.78% may hold for the next few sessions.