Market Morning Briefing: Aussie Has Dipped On Fall In Copper Prices

STOCKS

Dow has to sustain above 33000 to see an extended rise to 33450-33500 before a reversal. Else a fall can happen from here itself. DAX is at its crucial resistance which we expect to hold and drag the index lower. Nikkei and Shanghai look mixed and can remain sideways for some time. Sensex and Nifty have surged yesterday but have key intermediate resistances which will have to be broken in order to move up further and delay the expected fall.

Dow (33066.96, −104.41, -0.31%) has come-off below 33100 but sustains above 33000. While above 33000, we will have to allow for an extended rise to 33450-33500 before the expected reversal happens. A strong fall below 33000 has to be seen immediately to negate the rise to 33450-33500 and drag the Dow to 32000. Broadly we continue to remain cautious.

DAX (15008.61, +190.89, +1.29%) is poised at the crucial resistance level of 15000. We expect a pull-back from here towards 14400 initially and then to 14000-13800 eventually in the coming weeks. This view will get negated on a strong rise past 15050. In that case an extended rise to 15500-15700 is possible.

Nikkei (29200.21, −232.49, -0.79%) sustains above 29000 but seems to lack strength to breach 29500. A strong break above 29500 is needed to move up towards the upper end of the 28000-30500/31000 range. Broadly we expect Nikkei to oscillate in the 28000-30500/31000 range for some more time.

Shanghai (3424.62, −32.05, -0.93%) has come-off from yesterday’s high of 3457.63. This keeps the 3330-3470 range intact. A fall to 3350-3330 (the lower end of the range) is possible while below 3470. Also from a bigger picture, we reiterate that while below 3500, Shanghai can break 3330 and fall to 3250-3200 over the medium-term.

Sensex (50136.58, +1128.08, +2.30%) has surged and closed above 50000 yesterday. Resistance is at 50215 which below which the view of seeing 48000-47000 on the downside will remain intact. A strong break above 50215 will pave way for a further rise to 51000 and in turn will delay the above mentioned fall.

Nifty (14845.10, +337.80, +2.33%) has closed in the 15800-15900 resistance zone. We expect 15900 to cap the upside and drag it down to 14600-14400 again. It will also keep intact our broader bearish view of seeing 14000-13800 on the downside. A strong break above 14900 is needed to revisit 15200-15400 levels and delay the fall to 14400 and lower levels.

COMMODITIES

Commodities look bearish at current levels. Silver and Copper may test 22-21.50 and 3.90/80 respectively while Gold is trading near crucial support of 1670. A break below 1670 may take the price sharply lower towards 1650-1600. Crude prices may remain ranged for a while within 66-62 (Brent) and 63-57 (WTI).

Brent (64.26) and WTI (60.61) have dipped a bit from 66 and 63 as expected and has scope for a ranged movement within 66-62 and 63-57 respectively that could hold for the near term.

Gold (1680) trades at crucial levels just now. Immediate support is seen near 1670 which if breaks could open up chances of a deeper fall towards 1650-1600 in the coming sessions. Only an immediate bounce from current levels could take the price back to 1700 or higher. Watch price action near current levels that could be the decider of further direction from here.

Silver (23.87) has broken below the initial support at 24 and is now headed towards 22-21.50 on the downside from where we may expect the next bounce. View is strongly bearish for now.

Copper (3.9565) has finally broken below 4 and could now test 3.90/80 before pausing its fall. Immediate view is bearish.

FOREX

Strong Dollar continues to put downward pressure on most currencies and indicate a further decline in Pound, Aussie, Euro, Chinese Yuan and Indian Rupee. EURJPY may test 131 again if the current rising momentum holds. USDJPY is sharply up following the Dollar Index and could soon test 111.72/85 on the upside. Watch if USDINR holds below 73.39 to fall back towards 73.20/00 else a rise to 73.50 cannot be negated.

Dollar Index (93.42) continues to rise. A break above 93.50 may trigger a sharper rise towards 94.50 before falling off from there in the medium term. Watch price action near 93.50 to see if it declines from there.

Euro (1.1707) has fallen sharply to test 1.17 which needs to hold to produce a bounce back towards 1.1750 and higher. Failure to hold above 1.17 is strongly bearish and could bring in 1.16 into the picture.

EURJPY (129.75) is rising well and could re-test crucial immediate resistance at 131. A break above 131 if seen in the next few sessions would be strongly bullish for the cross. Watch price action near 131 in the near term.

Dollar-Yen (110.85) has risen sharply contrary to our expectation of a fall from 110.30/50 and while the pair sustains above 110.50, it can move up towards 111.72-111.85 in the near term. View is strongly bullish for the near term.

Aussie (0.7596) has dipped on fall in Copper prices. Near term could be ranged within 0.7545-0.7660.

Pound (1.3724) has diped and could fall further from current levels. View is bearish for the near to medium term towards 1.37-1.36.

USDCNY (6.5651) has dipped from 6.5791 in line with our expected dip from 6.58/60 mentioned yesterday. A short lived corrective dip to 6.54/55 could be possible before again resuming the uptrend. Immediate view is likely to be ranged within 6.54-6.58.

USDINR (73.39) rose up sharply to test 73.42 but it would be important to see where the pair closes for the month today. While there is scope for a test of 73.50 on the upside, we may expect a dip today towards 73.30/20 or even lower. Whether the pair rises higher and then eventually comes down during the day is to be watched closely. Today also we would remain in “wait and watch” mode before firm clarity is seen on further movement from here. A break above 73.50 if seen would be very bullish towards 74 in the near term.

INTEREST RATES

The US Treasury yields have come-off sharply from their intraday highs. The trend however remains up and we see room for the yields to move up further before witnessing a strong reversal. The German yields have moved up further and are keeping the bullish view intact. The 10Yr GoI can move up within its sideways range now. The broader bias is bearish to see a downside break of this range eventually.

The US 10Yr (1.73%) and 30Yr (2.39%) Treasury yields have come-off sharply from their intraday highs of 1.776% and 2.4630% respectively. The first level of resistances at 1.80% (10Yr) and 2.5%-2.6% (30Yr) are holding for now. However, a break of these resistances and an extended rise to 2% (10Yr) and 2.9%-3% (30Yr) still cannot be ruled out. As long as the yields trade above 1.5% (10Yr) and 2.2% (30Yr) the trend will continue to remain up.

The German 2Yr (-0.70%), 5Yr (-0.63), 10Yr (-0.29%) and the 30Yr (0.26%) have moved up further across tenors. The bullish view of seeing -0.20%/-0.15% (10Yr) and 0.35% (30Yr) on the upside remains intact. -0.40% (10Yr) and 0.20% (30Yr) are important supports which will have to be broken to turn the outlook negative.

The 10Yr GoI (6.1433%) is trying to bounce within the 6.10%-6.20% range. Our view remains the same. The 6.10%-6.20% range can remain intact for some time. From a bigger picture, we expect the 10Yr GoI to break 6.10% eventually and fall to 6%-5.9% going forward. A strong rise past 6.20% is needed to negate/delay this fall.