Market Morning Briefing: Dollar Index Has Bounced From 90.20

STOCKS

Dow and Nikkei continue to hover higher and keep alive the chances of seeing a rise to 32000 and 30000 respectively before reversing lower. DAX has bounced above 14000 but needs to breach 14200 to negate the chances of a fall that we have been expecting for some time. Sensex and Nifty can consolidate sideways in the near-term and then can see a corrective fall. Shanghai is closed for a week. Overall, equities look mixed. We reiterate that though there is room to move up from current levels, we prefer to remain cautious and not very bullish at the moment.

Dow (31430.70, −7.10, -0.02%) continues to hover near 31500. A test of 32000 is still possible. However, from a bigger picture we expect 32000 to be a cap on the upside now and a sharp corrective fall to 31000-30000 or even lower from there. We retain our cautious stance.

DAX (14040.91, +107.94, +0.77%) has risen back above 14000 but has to be seen if it can sustain higher. Also a strong rise past 14200 will be needed to turn the outlook bullish to see 14500 on the upside. While below 14200, the broader picture remains weak for DAX to see a fall to 13600 and 13400-13200.

Nikkei (29479.36, −83.57, -0.28%) seems to be struggling to get a strong follow-through rise above 29500. The chance of testing 30000 on the upside is still alive and thereafter we expect to see a sharp corrective fall to 29000-28000.

Shanghai (3655.09) is closed for a week on account of the Chinese New Year holidays. The Chinese markets will re-open on Thursday (18-Feb-21) next week.

Sensex (51531.52, +222.13, +0.43%) and Nifty (15173.30, +66.80, +0.44%) continue to sustain above their near-term support levels of 51000 and 15000 respectively. A sideways consolidation between 51000 and 52000 on the Sensex and 15000-15250 on the Nifty is a possibility in the near-term. A strong rise past 52000 (Sensex) and 15250 (Nifty) is needed to negate our negative bias of seeing a fall to 50000-49000 (Sensex) and 14800-14600 (Nifty) that we have been mentioning over the last few days. We will have to wait and see.

COMMODITIES

Gold and Silver look bearish now towards 1800-1780 and 25 respectively while Coper may still attempt to rise towards 3.80/90. Crude prices may see a pause and face a short corrective dip in the near term from current levels. Overall commodities look stable to bearish in the very near term except Copper that has some scope for a further rise.

WTI (57.75) and Brent (60.70) have both dipped after seeing a rise yesterday boosted by the lower US crude inventory levels. The crude prices now could stabilize or see a corrective dip from immediate resistances of 60 and 65 respectively. A fall towards 57-56 on WTI and 59-58 on Brent looks likely in the near term.

Gold (1821.90) has come down from levels near 1840/50 and while it manages to sustain below 1820, we may expect a dip towards 1800-1780 again in the near term.

Silver (26.97) has dipped too and may test 25 on the downside before again bouncing back to higher levels. Immediate view is bearish within the broad 25-29.50 range.

Copper (3.7715) may attempt to test 3.80/90 while above 3.70. Near term looks bullish.

FOREX

Currencies look stable just now. Dollar Index may trade within 90.20-90.60 region while Euro may remain ranged below 1.2150. Dollar Yen may test 105.20 on the upside before again coming off from there while Pound may still have scope to test 1.39/40 on the upside. USDINR has bounced well from support at 7270 yesterday and while that holds, it may rise back towards 73. USDCNY may rise within the range of 6.44-6.48.

Dollar Index (90.512) has bounced from 90.20 and could trade within 90.60-90.20 for the day. An attempt to move back towards 90.80-91.00 could be seen next week.

Euro (1.2119) looks stable near levels seen yesterday. While below 1.22-1.2150, we may expect some sideways ranged movement for now.

EURJPY (127.04) has risen well and could test resistance at 127.20 before falling off from there towards 126.50 or lower in the medium term.

Dollar-Yen (104.82) has bounced well from 104.40 and while that holds, we may expect a rise to 105.20 on the upside. Immediate view is bullish.

Aussie (0.7736) has scope for a gradual rise to 0.78 in the near term while above 0.7720.

Pound (1.3789) has faced rejection near 1.3865 and while that holds, we may expect the dip to extend to 1.3750 or even 1.37 before a rise is seen again towards 1.39-1.40.

USDCNY (6.4542) may trade within 6.42-6.48 region for the near term.

USDINR (72.8550) closed higher after testing the important support at 72.70. It would be important to note that while 72.70 holds there is scope for a bounce towards 73 or higher in the near term. Only a break below 72.70, if seen and sustained would open up chances of testing 72.50 else a clear bounce from current levels look more likely.

INTEREST RATES

The US Treasury yields have risen back well at the far-end. However, key resistances ahead can cap the upside and keep our view of seeing a fall intact. The yields will have to breach their resistances in order to negate our bearish view. The German yields have dipped but can find support near current levels and can move up further in line with our expectation. The 10Yr GoI has declined further and keeps our near-term bearish view intact. There is room for the yields to dip further.

The US 2Yr (0.11%) and 5Yr (0.46%) Treasury yields remain stable while the 10Yr (1.16%) and 30Yr (1.95%)have risen back. 1.20% on the 10Yr and 2% on the 30Yr are important resistances which have to be broken in order to bring back the chance of seeing 1.25% (10Yr) and 2.05% (30Yr) that we were expecting earlier. While below these resistances, our bearish view of seeing a fall to 1%-0.90% (10Yr) and 1.80%-1.75% (30Yr) remains intact.

The German 2Yr (-0.73%), 5Yr (-0.71%), 10Yr (-0.46%) and 30Yr (0.02%) have dipped across tenors. While above -0.50% (10Yr) and 0% (30Yr) we retain our near-term bullish view intact of seeing a rise to 0.40% (10Yr) and 0.05% (30Yr). -0.40% is a strong resistance for the 10Yr which will need a close watch in the coming days. However, as we have been mentioning for some time, the 30Yr looks more bullish to see an extended rise 0.15%-0.20% from here. We will have to wait and watch.

The 10Yr GoI (05.77 GS 2030, 6.0154%) fell to test 6% yesterday but has not broken below it. However, the near-term view continues to remain bearish and the yield can break 6% and fall to 5.98%-5.95% in the coming days.

The 10Yr (05.85 GS 2030, 5.9616%) on the other hand has tested 5.95% yesterday as expected. There is room for the yield to extend the fall to 5.93% in the near-term.