Market Morning Briefing: Euro Has Dipped Slightly After Testing 1.2150

STOCKS

Some sign of weakness is emerging in the indices like the DAX, Sensex and Nifty. But the Dow and Nikkei are still keeping alive the chances of seeing some more rise to 31500-32000 and 30000 respectively from current levels before seeing a correction. DAX has dipped below 14000 and can fall to 13600 and 13400-13200 from here. Sensex and Nifty can fall on a break below their respective immediate support levels of 51000 and 15000. Shanghai has closed on a strong note but is closed for the next one week on account of Chinese New Year holidays. It will have to be seen if it holds above 3600 when the market reopens next week. Overall we would retain our cautious stance in equities and approach the market from the sell side.

Dow (31437.80, +61.97, +0.20%) sustains higher and keeps intact the view of seeing a rise to 31500-32000 in the near-term. We reiterate that a sharp corrective fall to 31000-30000 is possible from around 32000 and we will remain cautious as the Dow moves up from here.

DAX (13932.97, −78.83, +0.56%) has declined below 14000 and is turning bearish. It is now vulnerable to see a fall to 13600 and 13400-13200 from here itself in line with our expectation. The chances of the rise to 14500 that was being mentioned last week stands negated now.

Nikkei (29562.93) is closed today on account of a public holiday. While above 29500, the near-term outlook is bullish to see a test of 30000 and then see a corrective fall to 29000-28000.

Shanghai (3655.09) is closed for the next one week on account of the Chinese New Year holidays. It has closed on a strong note above 3635. It will have to be seen if it sustains higher when the market reopens next week on Thursday (18-Feb-21) which will be needed to take it further up to 3700-3800.

Sensex (51309.39, −19.69, -0.04%) and Nifty (15106.50, −2.80, -0.02%) are managing to hold above their key near-term support levels of 51000 and 15000 respectively. However, the bias on the charts is negative. As such we can expect the Sensex to break 51000 and fall to 50000-49000. Nifty can break below 15000 and fall to 14800-14600 going forward. Sensex will have to break above 52000 and Nifty above 15250 in order to avoid the above mentioned fall.

COMMODITIES

Commodity prices look stable today with most commodities trading near levels seen yesterday. Crude prices may face immediate resistance near 60 (WTI) and 65 (Brent) from where a short corrective dip is possible before resuming the upmove. Copper may move up towards 3.80/90 gradually while Silver could test 26 and attempt to bounce from there. Gold on the other hand looks sideways ranged above 1800-1820 region and may test 1880-1900 on the upside gradually.

WTI (58.33) and Brent (61.09) both looks stable just now but we would look at immediate resistances near 60 and 65 to hold respectively in the near term producing a short corrective dip before again bouncing back to higher levels.

Gold (1838) is stable above 1820 but the price may attempt to rise towards 1880 or higher in the near term. Silver (26.80) on the other hand has broken below 27, but to indicate further bearishness we need to see a break below 26 as well in the near term. A test of 26 looks possible from where Silver can attempt to bounce back.

Copper (3.7525) looks stable just now but we retain the view of a possible rise to 3.80/90 in the near term.

FOREX

Currencies look stable today but the overall view of a possible dip in Dollar Index towards 90 remains intact while Euro may rise to 1.22 in the near term. Aussie and Pound looks strong. EURJPY may head towards 127.0-127.50 in the near term. USDCNY and USDINR looks ranged within 6.42-6.48 and 72.75-73.00 just now.

Dollar Index (90.4250) bounced from 90.25 yesterday but has failed to move lower. We continue to expect a possible test of support at 90 in the near term. Immediate view is ranged to bearish while below 91.

Euro (1.2118) has dipped slightly after testing 1.2150 but we do not negate a further rise to 1.22 within the current upmove.

EURJPY (126.76) has immediate support near 126.48 and while that holds, we may expect a rise towards 127-127.50 in the near term.

Dollar-Yen (104.59) has bounced from 104.41 and while that holds, we may expect a rise to 105 again on the upside. But we cannot rule out a possible test of 104 in the near term.

Aussie (0.7722) has dipped a bit today but overall looks bullish towards 0.78 or even higher while Copper may attempt to test 3.80/90 on the upside.

Pound (1.3833) has risen well and could continue to move up towards 1.39-1.40 gradually.

USDCNY (6.4442) looks ranged within 6.42-6.48 region for now. The pair has risen from levels just below 6.44 and while that holds, we may expect the sideways range to hold for a few more sessions.

USDINR (72.84) is now holding well below 73.00 and could possibly continue trade within 72.75-73.00 for the next couple of sessions.

INTEREST RATES

The US Treasury yields have declined sharply especially at the far-end thereby confirming the turn-around that we had been cautioning over the last few days. The yields can now extend the fall in the coming days. The US Core CPI declining sharply to 1.40% in January from 1.61% a month ago has triggered the fall in the US yields. German yields remain higher and can move up further from current levels. The near-term bullish view is intact. The 10Yr GoI has declined sharply contrary to our expectation. A further fall is possible from here and our earlier bullish view has got negated.

The US 2Yr (0.11%), 5Yr (0.45%), 10Yr (1.12%) and 30Yr (1.91%) Treasury yields have dipped sharply especially at the far-end following the inflation data release yesterday. The turn-around that we had been cautioning over the last few days is getting confirmed. As such the fall to 1%-0.90% (10Yr) and 1.8%-1.75% (30Yr) can very well happen now. The chances of seeing the extended rise to 1.25% (10Yr) and 2.05% (30Yr) stands negated now.

The German 2Yr (-0.72%) and 5Yr (-0.69%) yields remain stable while the 10Yr (-0.44%) and 30Yr (0.04%) have inched slightly up. This keeps intact the bullish view of seeing a rise to 0.40% (10Yr) and 0.05% (30Yr) in the near-term. We reiterate that the 30Yr has potential to extend the upmove to 0.15%-0.20% from here. As such, the 10Yr could breach its immediate resistance at -0.40% and move further up to -0.25% eventually.

The 10Yr GoI (05.77 GS 2030, 6.0359%) has declined below 6.05% contrary to our expectation. Failure to bounce-back from here and rise past 6.10% will be bearish to see a fall to 6%-5.95% in the coming days. The bullish view of seeing 6.25%-6.28% on the upside stands negated while the yield remains below 6.10%.

10Yr (05.85 GS 2030, 6.0096%) can fall in the near-term to 5.95%-5.93% on a break below 6%.