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Market Morning Briefing: Aussie Trades Just Below 0.74

STOCKS

Equities manage to hold higher but continue to show lack of momentum. We reiterate that the crucial resistances ahead on the major equities can cap the upside for now and a sharp corrective fall is on the cards. 30000 and 30800-31000 on the Dow and 13500 and 13800-13900 on the DAX are important resistances. Nikkei has a resistance at 27500. Sensex and Nifty have immediate resistances at 45000 and 13200/13250 respectively and then a next higher one at 46000 and 13500 respectively. Shanghai is attempting to break its 3180-3450 range on the upside but has another resistance at 3500 that can cap the upside. Overall we are not very bullish on equities although there is room for a rise in the near-term. We retain our cautious stance to see a sharp corrective fall going forward.

Although the Dow (29823.92, +185.28, +0.63%) had closed higher yesterday, the struggle to breach 30000 decisively continues and it had come-off well from the high of 30083.31 yesterday. We retain our cautious stance of seeing a corrective fall to 28000 and lower levels going forward. But whether this fall can happen from here itself or after an extended rise to 30800-31000 remains unclear at the moment.

DAX (13382.30, +91.14, +0.69%) has bounced-back and can test 13500 again. A break above 13500 can take it further higher to 13800-13900. As mentioned yesterday, we are nearing the top of the current upmove. 13500 and 13800-13900 are important resistances that can cap the upside and we will be looking for a sharp corrective fall to 12400 in the coming weeks.

Nikkei (26725.14, −62.40, -0.23%) continues to trade above 26500. As mentioned yesterday, there is room to test 27500 but a further rise beyond that is less likely. We expect Nikkei to reverse lower from 27500 and see a corrective fall to 25500 and even lower in the coming days.

Shanghai (3454.20, +2.26, +0.06%) is attempting to break the 3180-3450 range on the upside. It will have to be seen if it sustains above 3450. However, there is another strong resistance at 3500 that can cap the upside. Only a strong rise past 3500 will turn the outlook completely bullish for Shanghai. We will have to wait and watch the price action in the coming days.

Nifty (13109.05, +140.10, +1.08%) and Sensex (44655.44, +505.72, +1.15%) are coming closer to their first level of resistance at 13200/13250 and 45000 respectively. If they manage to break above these resistances, then an extended rise to 13500 (Nifty) and 46000 (Sensex) is possible. But that will not change our cautious stance as it will only delay our expected corrective fall to 12500 (Nifty) and 42000 (Sensex) and not negate it.

COMMODITIES

The American Petroleum Institute (API) reported a crude inventory build of 4.146mln barrels for week ending 27th Nov against analyst expectation of seeing a crude draw of 2.358mln barrels. Along with this the OPEC meeting failed to reach a consensus in its meeting to decide the output cuts for 2021 and have again decided to meet today before coming out with an announcement. These together have pulled down crude prices which could be subdued for a couple of sessions before again bouncing back from there. Watch supports near 45 and 43 on Brent and WTI respectively. Gold and Silver have bounced well but could fall back from 1820-1840 and 24 respectively. Copper may also dip from 3.50 before attempting to move up again in the longer run.

Brent (46.82) and Nymex WTI (43.94) trade lower today. We continue to watch price action near supports at 45 and 43 respectively from where a bounce is expected.

Gold (1816) has bounced sharply from 1774 yesterday, just below the support of 1780 mentioned yesterday. While immediate support region of 1780-1760 holds, the price could test 1820-1840 before again falling back towards lower levels. The broad range of 1840-1740 looks likely for the next couple of weeks.

Silver (23.95) has bounced from levels near 22.65 yesterday and the corrective bounce could be limited to 24 on the upside before again declining back towards 22-21 in the longer run.

Copper (3.4850) has risen slightly from levels seen yesterday but the price is likely to se a corrective dip towards 3.35 before rising above 3.50 towards 3.60 in the longer run. For now, we may expect 3.50 to cap the immediate upside.

FOREX

Dollar Index trades lower and looks weak while Euro, EURJPY, Pound and Yuan trade strong just now. We may expect Dollar Yen to test 105 before a fall is seen despite weakness in the Dollar Index. USDINR has scope to fall towards 73.50 or even lower in the near term in absence of RBI. Watch price action today at crucial levels.

Dollar Index (91.18) fell sharply and could be soon headed towards 90-89 on the downside indicating strength for other currencies across the world. View is strongly bearish.

Euro (1.2073) has tested and broken above 1.20 as Dollar Index fell sharply. Euro while sustains above 1.20 could be headed towards 1.21 or even higher. View is bullish while dollar index trades low.

EURJPY (126.08) has risen exactly in line with our expectations and could test 126.80/90-127 before a dip is seen from there. Immediate view is bullish.

Dollar-Yen (104.41) trades higher even though the Dollar Index trades lower. We may expect a test of 105 before a dip is seen.

Aussie (0.7376) trades just below 0.74 and while the currency is unable to break on the upside, we may expect a dip from here if it does not move up immediately. A dip if seen in Copper could drag Aussie lower in the near term. Watch price action near current levels.

Pound (1.3416) has just broken above 1.34 and if the bounce sustains we may expect a test of 1.35-1.36 on the upside soon. Watch price action above 1.34 just now for confirmation.

USDCNY (6.5567) dipped sharply as Dollar trades weak. While below 6.56, view is bearish on USDCNY. Sustenance below 6.56 would open up chances of testing 6.53 before a bounce is seen.

USDINR (73.6850) also has scope to move down towards 73.50 or even lower as the Dollar weakness and Euro strength would support but we need the RBI to remain out of the way to pose any obstruction for further fall in the pair below 73.50. If RBI comes in to buy near 73.50, we may look for a sharp bounce to 73.75/80 on the upside. View is bearish for USDINR in absence of RBI towards 72.90 on a break below 73.50 in the near term.

INTEREST RATES

The US Treasury yields have risen sharply as the risk appetite in the market continues to remain high and the equities continue to move up. However, key long-term resistances are ahead that can cap the upside and keep the long-term downtrend intact. The German yields have also bounced but have immediate resistances ahead which are likely to hold. The yields can reverse lower again from these resistances to keep the bearish view intact. The 10Yr GOI has broken its sideways range on the upside and is bullish to see further rise.

The US 2Yr (0.16%), 5Yr (0.41%), 10Yr (0.91%) and 30Yr (1.65%) Treasury yields have risen sharply especially at the far-end contrary to our expectation to see a dip to 0.78% (10Yr) and 1.50% (30Yr). The levels of 0.92% and 1% (10Yr) and 1.67% and 1.72%-1.75% (30Yr) are crucial to watch. We expect the upside to be capped at 1% (10Yr) and 1.72%-1.75% (30Yr) and the long-term downtrend to remain intact for targeting 0.70%/0.60% (10Yr) and 1.25% (30Yr) over the medium-term. A break above 1% (10Yr) and 1.75% (30Yr) will be a major turn-around in the market sentiment that will need a close watch.

The bounce in the German 2Yr (-0.73%), 5Yr (-0.72%), 10Yr (-0.53%) and the 30Yr (-0.12%) yields have bounced across tenors. However, immediate resistances are at -0.50%/-0.48% (10Yr) and -0.10%/-0.05% (30Yr). We expect these resistances to hold and keep the bearish view intact of revisiting 0.60% (10Yr) and -0.20% (30Yr) initially and then -0.70% (10Yr) and -0.35%/-0.40% (30Yr) eventually over the medium-term.

The 10Yr GoI (5.9308%) h