Market Morning Briefing: Dollar-Yen Has Dipped Slightly From 106.40/43 Levels

STOCKS

Equities seem to be coming under pressure. The resistance at 32000 on the Dow is holding well and a fall below 32000 can give an early sign of a reversal. DAX is struggling to breach 14000 decisively and looks vulnerable to break 13800 and fall to 13400-13200 from here itself. Nikkei has declined below 30000 and can fall to 28000. Shanghai is bouncing from its intermediate support at 3500 but can extend the fall to 3450-3400 while it remains below 3575. Sensex and Nifty can fall back below their key levels of 51000 and 15000 following the decline in other global indices and can revisit 50000-49500 and 14800-14600 levels respectively while the break sustains. SGX Nifty (14912.50, -267.50, -1.76%) is trading sharply lower and indicates a lower open in Nifty today.

Dow (31402.01, −559.85, -1.75%) fell sharply yesterday giving back all the gains made on Wednesday. The resistance at 32000 is holding well as expected. It will have to be seen if the fall is extending below 31000 from here which is needed to signal a top in place and drag the Dow to 30000 and even lower from here. The price action in the coming days will need a close watch.

DAX (13879.33, −96.67, -0.69%) is struggling to gain momentum to breach 14000 decisively. While the 13800-14200 range remains intact for now, lack of strength increases the chances of witnessing a break below 13800 and see a fall to 13400-13200 from here itself. For now, the chances of seeing an extended rise to 14500-14600 looks less.

Nikkei (29421.94, −746.33, -2.47%) has tumbled below the key level of 30000. A further break below 29000 can drag it to 28000 – the next important support. The price action at 28000 will need a close watch. For now, while below 30000 the chances of seeing 33000-34000 that we have been mentioning stands negated now.

Shanghai (3529.55, −55.49, -1.55%) has declined sharply and is attempting to bounce from near 3500. A strong rise past 3575 will be needed to see a sustained rise from here. While below 3575, Shanghai can break 3500 can fall further to 3450-3400 in the coming days. However, 3450-3400 is a strong long-term support which can limit the downside.

Sensex (51039.31, +257.62, +0.51%) broke above 51000 but has come-off from the day’s high of 51386.12. It seems to lack momentum and can fall below 51000 following the sharp fall in the global equities. Such a fall can then drag the Sensex lower to 50000 again and bring back the danger of seeing 49000-48500 on the downside. It will also reduce the chances of seeing 52000-52500 on the upside.

Similarly, Nifty ((15097.35, +115.35, +0.77%) can fall below 15000 today and revisit 14800-14600 levels while the break below 15000 sustains. That in turn will reduce the chances of seeing 15400-15500 on the upside.

COMMODITIES

Crude prices look stable just now but may rise towards respective resistances soon. Copper too has dipped and could extend its corrective dip to 4.20/10 before again resuming its uptrend. Gold and Silver are down too. While Silver looks stable above 27, Gold looks bearish for a test of 1750 before a bounce is seen from there. Overall commodities are stable or look bearish for the near term seeing a pause in the otherwise uptrend.

Brent (66.72) and WTI (63.25) have dipped slightly and look stable just now but could be slowly inching up towards resistances near 68-70 and 65-67 respectively in the near to medium term. Overall view is bullish.

Gold (1772.30) has dipped sharply as expected and could be headed towards 1750 which is an interim support that could produce a bounce in the near term. Immediate view is bearish.

Silver (27.43) dipped too but looks bullish while above 27. While Gold declines sharply, Silver may more or less remain stable with less volatility in the near term.

Copper (4.2450) has dipped sharply from levels near 4.3755. This dip may be corrective and short lived followed by resumption of the upmove soon. Medium term upside target of 4.60 remains intact but before that the corrective dip may take the price down towards 4.20/10.

FOREX

Dollar Index tested 89.68 but failed to sustain lower and instead bounced back sharply to 90+. Euro could eventually rise towards 1.23 while above 1.21. Aussie and Pound have declined sharply but while above 0.78 and 1.3950, there is possibility of seeing a decent bounce from current levels. USDINR may test 72.55/60 before falling off from there.

Dollar Index (90.17) fell to test 89.68 yesterday bit bounced back sharply to levels above 90. The trade below 90 is attempted but the index fails to sustain below 90. This is crucial and needs to be closely watched as another attempt to break below 90, if seen may sustain and take the index lower. Else 91-90 could hold for some more time.

Euro (1.2170) has dipped from 1.2243 seen yesterday. The spike is not indicative of bearishness but is likely to keep Euro stable just now above 1.21. While above 1.21, view is bullish for a steady rise towards 1.23/1.2350.

EURJPY (128.98) rose again yesterday to almost test crucial resistance near 130. While 130 holds, a corrective dip towards 128.50 looks possible before again seeing a bounce back from there. Any break above 130 in the near term would open up chances of an eventual rise towards 135.

Dollar-Yen (105.96) has dipped slightly from 106.40/43 levels. There is scope for a test of 107 if 106.50 break on the upside. Else a fall back towards 105 or lower could be seen in the near term.

Aussie (0.78630) has fallen sharply and could bounce from 0.78 in the near term. While above 0.78, view is bullish towards 0.7950.

Pound (1.4009) has declined sharply as levels above 1.42 holds as a strong resistance just now. A test of 1.39/38 looks possible within the current fall if 1.3940 fails to be an immediate support that could pull back Pound to 1.41 or higher.

USDCNY (6.4683) is stable and ranged within our expected 6.44-6.47 region. The range may continue to hold for a few more sessions.

USDINR (72.42) closed lower after testing 72.52 on the upside exactly in line with our expectation. Today, we may expect a test of 72.55/60 which is the revised resistance on the daily charts and need to hold to push back the pair to lower levels of 72.25/00. Failure to remain below 72.60 would trigger a sharp upmove towards 72.80. Watch price action near 72.60 today from where a dip is expected.

INTEREST RATES

The US Treasury yields spike to a high of 1.61% (10Yr) and 2.40 (30Yr) in the US sessions and has come-off sharply from there. The outlook is still bullish and the yields can revisit 1.60% (10Yr) and 2.40%-2.50% (30Yr) based on the line charts (closing basis) in the coming weeks and then can see a reversal. The German yields have surged across tenors and are keeping our bullish view intact. The yields are coming closer to their crucial resistances and will need a close watch in the coming weeks. The 10Yr GoI has risen back contrary to our expectation to extend the corrective fall up to 6.12% and can resume its upmove if it manages to breach 6.20% from here.

The US 2Yr (0.15%), 5Yr (0.78%), 10Yr (1.48%), 30Yr (2.26%)continues to surge. The 10Yr and 30Yr had spiked to a high of 1.61% and 2.40% and has come-off sharply. The view remains bullish. On the line charts, 1.55%-1.60% on the 10Yr and 2.50% on the 30Yr are important resistances. As such we may still have to allow for a rise to 1.60% (on a closing basis considering the line chart) though this level has already been tested on an intraday basis. Thereafter we can expect a corrective fall from 1.55%-1.60% (10Yr) and 2.50% (30Yr).

The German 2Yr (-0.67%), 5Yr (-0.55%), 10Yr (-0.23%) and 30Yr (0.24%) have surged across tenors. The 10Yr has risen past -0.25%. There is room to test -0.20% and -0.15%. But thereafter we can expect the yield to reverse lower. The 30Yr on the other hand can rise to 0.35% (revised down from 0.40% mentioned so far) and then reverse lower.

The 10Yr GoI (6.1823%) has risen sharply without seeing a dip to 6.12%. A further rise past 6.20% will indicate the resumption of the uptrend and will take the yield higher to 6.28%-6.30% in the coming weeks. Failure to breach 6.20% can drag the 10Yr GoI lower and will keep alive the chances of seeing 6.12% on the downside before seeing the rise to 6.28%-6.30%.