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Market Morning Briefing: Aussie Has Bounced Well As 0.7580 Holds Good

STOCKS

Equities remain mixed. Dow is stuck in between 33500 and 34000 while DAX between 15100 and 15300. They will have to break above 34000 (Dow) and 15300 (DAX) to move up further. Else a fall can be seen from here itself. Nikkei can fall within its 28000-31000 range. Shanghai is bearish to test 3350 immediately and 3300-3250 eventually. Sensex and Nifty have bounced but will have to rise past their immediate resistance to retain the sideways movement and also to avoid a deeper fall from here. Overall, continue to remain cautious on equities and not very bullish at the moment.

Dow (33730.89, +53.62, +0.16%) has come-off from the high of 33911.25. It can oscillate between 33500 and 34000 in the near-term. While below 34000, we expect the Dow to break 33500 and fall to 33000. As we have been mentioning over the last few days, a strong break below 33000 is needed to bring the Dow under pressure for a fall to 32000-31000 that we have been looking for.

DAX (15209.15, −25.21, -0.17%) is stuck in a narrow range of 15100-15300 over the last couple of weeks. Inability to get a strong follow-through rise above 15200 is decreasing the chances of seeing 15500-15700. A fall below 15000 from here will negate that chance completely and drag the DAX to 14600-14400 and even lower in the coming days.

Nikkei (29655.37, +34.38, +0.12%) is still stuck in between 29500 and 30000. The bias is negative to see a break below 29500 and a fall to 28500-28000 in the coming days. The broader range of 28000-30500/31000 remains intact and the index can fall within this range now.

Shanghai (3382.13, −34.59, -1.01%) has declined below 3400 and is keeping our bearish view of seeing 3350 on the downside. As mentioned earlier, a break below 3350 can drag Shanghai towards 3300-3250 and even 3200 over the medium-term. The price action near 3350 will need close watch in the coming sessions.

Nifty (14504.80, +194, +1.36%) has bounced-back but needs to rise past 14700 from here to reduce the danger of breaking below 14200 immediately and keep the 14200-15000/15200 range intact. While below 14700, the index is likely to remain under pressure to break 14200 and fall to 14000-13800 in the coming days.

Sensex (48544.06, +660.68, +1.38%)has bounced-back above 48000 but has to rise past 49000 to move up further and delay the fall to 47000-46000. While below 49000, Sensex is likely to remain under pressure to test 47000-46000 on the downside immediately.

COMMODITIES

Crude prices have risen well boosted by a US crude inventory drop and an upward revision of demand forecast by the IEA. Brent may rise towards upper resistance near 68-70 while WTI could be headed towards 65-67 levels. Gold is trading within 1720-1760 region and needs to break on either side to give further directional clarity. Silver may rise towards 26-27 while above 25. Copper is bullish to 4.20/30 while above 4.0.

The International Energy Agency (IEA) has revised its demand forecast upwards, leading to a sharp rise in crude prices. The EIA had earlier showed a drop of 5.9mln barrels in US crude inventories as compared to analyst expectations of 3.5mln barrels. In addition, the American Petroleum Institute (API) also reported on Tuesday that the crude oil stockpiles dropped in the US by 3.6mln barrels last week.
All the above data released together boosted a rise in crude prices. Brent (66.56) rose sharply to trade above 66 as expected and may now test 68-70 which is a medium term resistance. A fall from 68-70 could be seen over the next few sessions. Immediate view is bullish.

WTI (63.08) can also rise towards 65-67 in the near term. Immediate view is bullish.

Gold (1736.20) is holding within the 1720-1760 region and while that holds, it would be difficult to project further direction from here. A break above 1760 is necessarily needed for an upside trigger, else a fall below 1720 could drag the price down to 1700-1680 (less .likely) once again within an overall longer term uptrend. In the longer run, we look for a rise to 1800-1820 which could then initiate further rally.

Silver (25.47) finds difficult to remain below 25 for long and has bounced back possibly indicating a rise towards 26-27 in the medium term. Such a rise if seen could also pull up Gold prices.

Copper (4.1105) has held above initial support at 4 and could rise slowly towards 4.20/30 in the near term. View is bullish while above 4 and we may negate chances of testing lower support of 3.90.

FOREX

Dollar Index has fallen sharply taking up Euro and Yen along. Euro may head towards 1.20+ while USDJPY may fall to 108.50/30 if Dollar Index heads lower to test 91.50 or lower. EURJPY may trade sideways while Aussie and Pound may see restricted upmove and could soon fall in the near to medium term. USDCNY may dip to 6.52 before bouncing higher. USDINR may test 75.20 today, a break above which could open up scope for testing 75.40/50; else a pull back to 74.80/60 may be possible.

Dollar Index (91.67) has broken below 92 clearly and needs to sustain the fall in order to move down slowly towards 91.50-90.50 in the medium term. This could be bullish for Euro (1.1973) which has also sharply moved up above 1.19 and is headed to 1.20. A break in the Dollar Index below 91.50 may take Euro above 1.20 soon. Watch price action near 91.50 on Dollar Index and near 1.20 on Euro.

EURJPY (130.40) is trading sideways and could continue to trade below 131 for now. A break above 131 is expected soon that may trigger a rise towards 135 in the medium to long term.

Dollar-Yen (108.91) has clearly broken below 109 in line with the fall in Dollar Index. While the Dollar Index sustains below 92, Dollar Yen is also likely to be bearish towards 108.50/30.

Aussie (0.7716) has bounced well as 0.7580 holds good. A test of 0.78 looks possible which if holds could keep the pair within 0.78-0.77 for sometime. Only a break above 0.78 would make Aussie further bullish,

Pound (1.3774) has been rising well but watch out resistance near 1.38 which if holds could push back the currency down to 1.37 or lower in the longer run.

USDCNY (6.5380) has dipped and may test 6.52 before rising back towards 6.54/58 again in the medium term.

USDINR (75.0650) may possibly rise to test 75.20 on the upside. Failure to face rejection from 75.20 may take the pair higher to 75.40/50 else a pull back to 74.80/60 could be expected, Watch price action near 75.20 today.

INTEREST RATES

The US Treasury yields remain stable above their key support levels. We reiterate that unless the yields fall below their supports, the trend will continue to remain up and a fresh rally in the coming weeks cannot be ruled out. The German yields have moved up towards the upper end of their current sideways consolidation. The bias is bullish to see an upside breakout of this range and rise in the coming days. The 10Yr GoI can consolidate around 6% for some time before resuming the downtrend towards 5.9%.

The US 2Yr (0.16%), 5Yr (0.86%), 10Yr (1.64%) and 30Yr (2.32%) Treasury yields continues to trade stable above the key support levels of 1.55%-1.50% (10Yr) and 2.25%-2.20% (30Yr). We reiterate that while above these supports the trend is still up and the yields have potential to target 1.9%-2% (10Yr) and 2.9%-3% (30Yr) on the upside over the medium-term. A strong break below 1.55% (10Yr) and 2.2% (30Yr) is necessarily needed to signal a trend reversal.

The German 2Yr (-0.70%), 5Yr (-0.61), 10Yr (-0.26%) and the 30Yr (0.29%) have moved up sharply and are poised near the upper end of their -0.35/-0.25 (10Yr) and 0.2%-0.3% (30Yr) range. Our view remains the same. The yields can break their range on the upside and move up to -0.20%/-0.15% (10Yr) and 0.35% (30Yr) can be seen over the medium-term. As mentioned earlier, a strong break below -0.40% (10Yr) and 0.20% (30Yr) is needed to turn the outlook bearish.

The 10Yr GoI (6.0114%) remains stable around 6%. The bearish view remains intact. However, a consolidation around 6% or a corrective bounce to 6.06%-6.08% is possible before the fall to 5.9% happens.

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