Market Morning Briefing: Aussie Is Attempting To Remain Above 0.74

STOCKS

Equities continue to move higher but will have limited room on the upside from here. As such we retain our cautious stance on the equities and will approach them from the sell side as they continue to move up from here. 30800-31000 on the Dow, 13500 on the Nifty and 46000 on the Sensex are crucial levels that can cap the upside from here. DAX remains stable below 13500 itself and has a higher resistance at 13800/13900. Nikkei has limited room upto 27500 from here. Shanghai is holding below its range resistance of 3450 and keeps the 3180-3450 range intact.

Dow (30218.26, +248.74, +0.83%) has risen above 30000 and is likely to head towards the next crucial resistance zone of 30800-31000. As we have been mentioning for some time 30800-31000 is an important resistance above 30000 which is likely to cap the upside. We expect a sharp corrective fall from the 30800-31000 zone towards 28000 and even lower going forward.

DAX (13298.96, +46.10, +0.35%) remains stable above 13200. The near-term outlook is mixed. 13200 and 13000 are important supports to watch. A break below 13000 will trigger the corrective fall to 12400 that we had been cautioning for some time. 13500 and 13800/13900 are key resistances that can cap the upside from here.

Nikkei (26643.25, −107.99, -0.40%) continues to oscillate between 26500 and 27000. Our view remains the same. There is room to test 27500 on the upside. But from a bigger picture we see 27500 as a cap on the upside and a corrective fall to 25500 and even lower can be seen in the coming days. A break below 26500 can trigger this fall.

Shanghai (3431.80, −12.78, -0.37%) continues to trade below 3450. The 3180-3450 range remains intact for now. As mentioned on Friday, a sideways consolidation between 3400 and 3450 is possible in the near-term. A break below 3400 will then drag the index lower to 3300-3250 going forward. In case of a break above 3450, the upside can extend up to 3500.

Nifty (13258.55, +124.65, +0.95%) and Sensex (45079.55, +446.90, +1%) have risen above 13250 and 45000 respectively. As mentioned on Friday we can now see an extended rise to 13500 (Nifty) and 46000 (Sensex) in the coming days. But thereafter the indices are likely to reverse lower and can see a sharp corrective fall to 12800-12500 (Nifty) and 42000 (Sensex). As such we continue to be cautious and will remain on the sell side of the market.

COMMODITIES

Crude prices could be ranged within 44-47 (WTI) and 45-50 (Brent) for the near term before rising back towards 50 and 52 respectively. Gold could head towards 1880 before dipping back to 1840-1820 again. Silver could be headed towards 25 while above 24. Copper has scope to see a corrective dip towards 3.40/35 before rising back towards 3.60/65 in the longer run.

Brent (49.07) and Nymex WTI (46.08) have dipped from 49.25 and 46.25 respectively. We continue to look at a possible range of 50-45 on Brent and to gradually break on the upside to test 52 in the medium term. Watch price action near 50 just now. WTI on the other hand could hold below 47 just now and see ranged movement within 44-47 before eventually rising towards 48-50 on the upside.

Gold (1841.50) and Silver (24.25) trade higher. Gold has scope for a rise to 1880 on the upside while support at 1820 holds well. From 1880 we may expect a dip back to 1840-1820 before rising back towards 1900 or higher in the longer run. Overall near term view is bullish towards 180 followed by a corrective dip. Silver on the other hand is likely to remain ranged in the 24-25 region. While above support at 24, there is scope for a rise to 25.

Copper (3.5065) has dipped from 3.5460 in line with the daily trend resistance. A dip to 3.40/35 is possible on the downside before the price attempts for a sharp rise towards 3.60/65 in the longer run.

FOREX

Dollar Index trades lower but could spend some time in a ranged fashion below 91 while Euro may also remain ranged below 1.2184. EURJPY also looks ranged within 1.2184-1.2100. Aussie and Pound are trading below crucial levels and if they find it difficult to move up sharply from here, they could eventually turn lower. USDCNY looks ranged too while Dollar Yen may fall towards 103.10. USDINR may test 74 or upside while above important support at 73.50. If not a rise to 74, it can remain ranged within 74.00-73.50.

Dollar Index (90.67) has bounced slightly over the last 2-sessions but while below 91, there could be scope of some ranged movement within 90-91 before resuming the fall towards 89 or even 88 in the longer run. Watch price action closely for the next few sessions. View remains bearish for now.

Euro (1.2136) also has been paused at 1.2184 and while below that we may expect some ranged movement within 1.2184-1.2100 before a resumption of the uptrend is seen towards 1.23 or higher. But if 1.22 manages to hold well just now, we may expect a corrective dip towards 1.2040-1.2000 before again moving up. Watch price action closely.

EURJPY (126.19) faced rejection from 126.70 and while that holds we may expect some ranged movement within 126.70-125.75-125.00 region. While below 127, view is likely to be ranged.

Dollar-Yen (103.98) trades below 104 and if the Dollar Index manages to sustain below 104, we may expect a fall towards 103.64-103.10 in the near term which are interim supports. In the longer picture if Dollar Index declines towards 89-88, Dollar Yen could well test 102 again on the downside. But for now, we look at 103.10 to cap the immediate downside.

Aussie (0.7430) is attempting to remain above 0.74 but is not seeing a significant rise despite sharp weakness in Dollar seen over the last couple of weeks. But while above 0.74, the currency may slowly inch upwards targeting 0.75-0.76 in the longer run.

Pound (1.3379) had risen to test 1.3540 on the upside before sharply coming off below 1.35 again. While the rise above 1.35 could not sustain, it could mean that immediate resistance near 1.3240 may hold for sometime and keep Pound lower. Overall near term range of 1.3284-1.3540 looks possible.

USDCNY (6.5575) has bounced from 6.5264 itself and could rise to 6.56-6.57 before again dipping back towards 6.52 or lower. View is bearish with some possible corrective bounces possible.

USDINR (73.8025) traded within a narrower range of 73.70-73.82 region on Friday before closing in the middle of the 73.50-74.00 zone. While above 73.50 and presence of RBI intervention, we may expect a rise in the pair towards 74 or higher despite Euro strength and Dollar weakness. If not a rise to 74, it can remain ranged within 74.00-73.50.

INTEREST RATES

The US Treasury yields have risen sharply on Friday as the risk appetite in the market remains high and the equities continue to surge. Key resistances are coming up for the US yields which will need a close watch this week to see if they are holding or not. The German yields are likely to fall again while they remain below their immediate resistance. The 10Yr GoI has declined sharply on Friday. An immediate support is at 5.88% which will have to hold in order to keep alive the chances of a bounce-back again and also to avoid further fall.

The US 2Yr (0.15%), 5Yr (0.41%), 10Yr (0.96%) and 30Yr (1.72%) Treasury yields have risen further sharply on Friday. They are coming closer to the crucial levels of 1% (10Yr) and 1.75% (30Yr). A strong and sustained break above these resistances will be a major turn-around as it would signal a long-term trend reversal. We would wait and watch the price action in the coming days to get a clear cue. Inability to break 1% (10Yr) and 1.75% (30Yr) can drag the yields lower to 0.85%-0.80% (10Yr) and 1.55%-1.50% (30Yr) again.

German 2Yr (-0.76%) and 5Yr (-0.76%) Yields remain stable while the 10Yr (-0.55%) and the 30Yr (-0.13%) have inched slightly higher on Friday but are unlikely to sustain. The view remains bearish as the resistances at -0.50% (10Yr) and -0.10% (30Yr) have held well last week in line with our expectation. While below these resistances a revisit of 0.60% (10Yr) and -0.20% (30Yr) initially and then -0.70% (10Yr) and -0.35%/-0.40% (30Yr) eventually can be seen in the coming weeks. Thereafter a fresh bounce is possible.

The 10Yr GoI (5.8982%) has declined sharply below 5.91% on Friday. Immediate support is at 5.88% which has to hold in order to keep the chances alive of seeing a bounce-back to 5.91%-5.92% and higher levels again. A break below 5.88% can drag the 10Yr GoI to 5.86%. The price action at 5.88% will need a close watch.