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Market Morning Briefing: Aussie Has Broken Below 0.76

STOCKS

Equities continue to move up and will be coming closer to their crucial resistance in some time. So as mentioned yesterday, we would be approaching cautiously as the equities move up from here. Dow has risen above 31000 but will have resistance in the 31300-31500 and 31800-32000 region that can cap the upside. The jobs data release today will need a close watch to see how it can impact the Dow. DAX has risen above 14000 and can test 14500 before reversing lower. Nikkei has resistance at 29000 and 29500 that can cap the upside from here. Shanghai can trade sideways for sometime within its long-term uptrend. Sensex and Nifty have room to test 51000-51500 and 15000-15150 after which we expect them to turn around.

Dow (31055.86, +332.26, +1.08%) has risen to test 31000 as expected and it can extend the upside up to 31300-31500. It will have to be seen if it can breach 31500 and move further up to 31800-32000 before seeing a reversal. Broadly our stance will now be cautious as the Dow approaches 31500 and even if it extends beyond it.

DAX (14060.29, +126.66, +0.91%) has above 14000 and can move up to 14200-14500 now. As mentioned yesterday, 14200 and 14500 are key resistances and we expect a reversal anywhere from the broad 14000-14500 zone that can take DAX lower to 13400-13200 in the coming weeks.

Nikkei (28722.85, +380.90, +1.34%) has risen back above 28500 and keeps alive the chances of testing 29000. It will have to be seen if it can break 29000 and extend the rise up to 29500. From a broader picture, 29000-29500 is a strong resistance zone and we will be looking for a corrective fall to 27000-26500 from this support zone going forward.

Shanghai (3523.12, +21.26, +0.61%) has risen back above 3500 thereby reducing the chances of revisiting the 3470-3450 support zone again. 3550 will be an important near-term resistance to watch. A break above it can take Shanghai to 3600 again. Broadly, 3450-3550 (narrow) and 3400-3635 (broad) range that is possible for a few weeks. Within this while above 3400, the long-term trend will remain up.

Sensex (50614.29, +358.54, +0.71%) and Nifty (14895.65, +105.70, +0.71%) have moved up further and retain their bullish momentum. Sensex can test 51000 and can even extend the upside to 51500 and even 52000 on a break above 51000. However, 51000-52000 region is a strong resistance zone from where a correction is possible. So need to be cautious. Nifty can test 15000-15150 from where a reversal is possible.

COMMODITIES

Crude prices look bullish on demand optimism and US inventory stock draw seen for week ended 29th Jan’21. Overall both Brent and WTI look bullish. Gold has broken below crucial support at 1800 and looks bearish for a fall towards 1760-1740. Silver needs to sustain above 25/24 to be able to bounce back again else we cannot negate a fall to 22. Dollar strength is weighing pressure on the precious metals just now and may continue in the near term. Copper is ranged just now but while below 3.65, a possible fall to 3.45/40 cannot be negated. Overall commodities look bearish except Crude.

Brent (59.41) and WTI (56.82) have risen as expected. While WTI seems to have broken above the weekly resistance near 56, Brent is yet to break above 60. Sustained break above 60 just now could keep the rally on and take prices higher towards 67 on Brent and 60 on the WTI soon. Overall view remains bullish for the near to medium term.

Gold (1796.50) has broken below 1800 as doubted yesterday and could now head towards 1760-1740 in the near term. View is bearish while below 1800 as Dollar trades strong.

Silver (26.38) is also trading weak and could test 25-24 before bouncing back again. Failure to hold above 24/25 would make it vulnerable for a fall to 22 on the downside. Watch price action near 25/24.

Copper (3.5640) remains stuck within the narrow sideways range of 3.65-3.50. While below 3.65, Copper looks bearish for a possible test of 3.45/40.

FOREX

Dollar Index trades strong and could pull down Euro towards 1.19 while the index itself could be headed towards 92. USDJPY may test 106.10 while EURJPY may bounce from support near 126. USDCNY may rise to 6.50 while USDINR may break above 73 to head towards 73.20. Overall currencies remain weak while the Dollar index continues to move up.

Dollar Index (91.58) has scope to rise to 92 before seeing a dip from there again. Immediate view is bullish.

Euro (1.1954) has fallen sharply and could test 1.19 in the near term.

EURJPY (126.19) has support at 126 which if holds could produce a bounce back to 127 in the near term. Failure to hold above 126 could take it down to 125.5-125.00 on the downside.

Dollar-Yen (105.55) has risen well and the strength in Dollar Index is boosting the rally in USDJPY. A test of 106.10 could be on the cards of the rise above 105.64/75 sustains. Immediate view is bullish.

Aussie (0.7587) has broken below 0.76 and indicates a possible fall to 0.75 over the next few sessions. The fall could be accelerated if Dollar continues to trade strong and if Copper also falls below 3.50 (refer commodities section above).

Pound (1.3669) is likely to remain ranged within 1.38-1.36 in the near term both being immediate resistance and support levels. Unless a break on either side of this range is seen, further view is unclear just now.

USDCNY (6.4769) has risen well on dollar strength and could test 6.50. A break above 6.50, if seen would take it higher towards 6.52 which if seen would be early signals of a reversal. For now while below 6.50, there could be scope for a ranged movement within 6.50-6.44.

USDINR (72.9525) is likely to remain below trend resistance near 73 on the chart but the sharp fall in Euro and Dollar strength may work otherwise and pull up USDINR towards 73.10-73.20 in the near term, forcing the pair to break above 73.

INTEREST RATES

The US Treasury yields continue to retain our near-term bullish view of testing its key resistances. We expect the yields to reverse lower after that. The German Yields are moving up in line with our expectations. The near-term outlook is bullish and the yields have room to move up further. The 10Yr GoI can see a corrective dip to test its key support and then can resume the upmove. The outcome of the Reserve Bank of India’s monetary policy meeting will need a close watch today.

The US 2Yr (0.11%) and 5Yr (0.45%) Treasury yields have dipped slightly while the 10Yr (1.13%) and 30Yr (1.93%)remains higher and stable. Our view of seeing 1.20% (10Yr) and 1.95%-2% (30Yr) – the key resistances on the upside remain intact. We expect these resistances to hold and the yields can reverse lower from there to keep the long-term downtrend intact.

The German 2Yr (-0.72%), 5Yr (-0.69%), 10Yr (-0.46%) and 30Yr (0%) yields are moving up in line with our expectation. The 10Yr can head towards -0.40% – an important resistance to watch. The 30Yr has tested 0% and can move up to 0.05%. The 30Yr looks more bullish to extend the rise even up to 0.15%-0.20% in the coming weeks. If so, then the 10Yr can break the resistance at -0.40% and extend the rise to -0.25%. We will have to wait and watch.

The 10Yr GoI (6.0954%) remains lower and keeps intact our view of seeing a corrective fall to 6.05%-6.06%. However, the broader view is bullish and we expect the 10Yr GoI to reverse higher from the 6.06%-6.05% support zone and resume the uptrend to target 6.25%-6.28% in the coming weeks.