Market Morning Briefing: Dollar Index Has Broken Below 90

STOCKS

Asians are trading weak. Nikkei has failed to break above 28500 and keeps the bearish view intact. Shanghai has to sustain above 3500 to breach 3525 and rise further. Sensex and Nifty have closed higher yesterday but have to be seen if they can move up further on the back of the weakness in the Asian indices. Dow looks mixed within its broad 33500-35000 range. DAX still keeps alive the chances of seeing 15700-15800 on the upside before reversing lower.

Dow (34060.66, −267.13, -0.78%) is stuck between 34000 and 34500 over the last few days within its expected broad 33500-35000 range. A break below 34000 can take the Dow to 33500. As we have been mentioning for some time, 33500 and 33000 are crucial supports and the Dow has to fall below 33000 to become bearish.

DAX (15386.58, −10.04, -0.07%) has come-off sharply from the high of 15538.01 yesterday. Immediate support is at 15200 which above which we retain our view of seeing 15700-15800 on the upside first before seeing a reversal. We will have to wait and watch.

The resistance at 28500 on Nikkei (28008.09, −398.75, -1.40%) has held well and the index has come-off again. This keeps our bearish view intact of seeing 27000-26000 on the downside. As mentioned yesterday, a strong rise past 28500 is needed to become bullish again.

Shanghai (3514.82, −14.20, -0.40%) continues near the crucial resistance level of 3525. While above 3500 we see high chances of a break above 3525 and a rise to 3600-3650. A fall below 3500 will reduce that chance and can drag Shanghai to 3450-3400 again. We will have to wait and watch.

Nifty (15108.10, +184.95, +1.24%) has closed just above the crucial level of 15100. It will have to be seen if it can sustain above 15100 on the back of the sell-off in Asian markets today. A pull back from here breaking below 15000 can drag the Nifty to 14800 again. A strong follow-through rise from here is needed to take the Nifty up to 15200-15400 in the coming days. We will have to wait and watch.

Sensex (50193.33, +612.60, +1.24%) on the other hand has to rise past 50500 to move up towards 51500-52000 levels again. Inability to breach 50500 can drag the index lower to 49500-49000 again in the near-term.

COMMODITIES

Commodities have dipped yet again. Gold, Silver, Copper and crude are down from levels seen yesterday and could continue to dip in the near term. Copper is bullish for the medium term while above 4.60. Gold has immediate resistance near 1880 which needs a close watch to see if it holds or breaks in the near term. Silver is bullish while above 27. Crude prices are expected to remain ranged.

Brent (67.95) and WTI (64.74) have dipped back as resistances have held well near $70 and $67 respectively. While the resistances hold, we continue to look for a ranged movement within $65-70 on Brent and $62-67 on WTI for some more time. Thereafter, a break on either side would decide on further direction from here.

Gold (1865.50) has fallen from 1875 levels seen yesterday. We continue to look at immediate resistance near 1880 which has to break in order to keep the upward rally going. Else a dip to 1820-1800 cannot be negated from current levels.

Silver (28.05) dipped instead of rising higher above 29. But the fall could be temporary and while above 27, an eventual rise to 29.50-30 could be possible.

Copper (4.7035) has dipped slightly but could be headed up while above immediate support near 4.60. 4.80/90 is the next target level.

FOREX

Dollar Index has dipped below 90 and is headed towards support near 89.50/30. Euro trades above 1.22 and could rise to 1.2320 before falling off from there. EURJPY, Aussie and Pound look bullish from current levels. Dollar-Yen may test 108.35 before bouncing back from there. Chinese Yuan and Rupee trades strong and while USDCNY has crucial support near 6.42/40, USDINR has important support near 73.00-72.80 which needs to hold in order to produce a bounce back to higher levels. Failure to hold above the respective supports could trigger fresh fall in both the pairs.

Dollar Index (89.814) has broken below 90 and is headed towards immediate support near 89.50/30 which needs to hold for the index to rise back towards 90.50 or higher again in the near term. Only a break below 89.50/30 if seen would trigger a fall in the index that could take it further down towards 88-86 in the coming weeks. This if seen would be crucial and could indicate upcoming strength in most other currencies. Watch price action near 89.50/30.

Euro (1.2222) has moved up well, breaking above 1.22. A test of 1.2320 looks possible before decline sets in from there. Watch price action near 1.2320 if Euro rises from current levels.

EURJPY (133.20) has been moving up in line with our expectation and could target 135-136 soon on the upside.

Dollar-Yen (108.95) may not dip below 108.35/00 just now and instead could bounce back from there if support on the Dollar Index holds. Watch 108.35/00 to see a bounce back from there towards 109-110 again.

Aussie (0.7787) is stable near levels seen yesterday. A rise from here looks possible towards 0.78-0.7850 in the near term while the Dollar Index trades lower.

Pound (1.4183) has risen a bit and continues to move up towards 1.42 from where a dip from towards 1.40-1.39 can be possible. Watch price action near 1.42.

USDCNY (6.4288) needs to pause at 6.42/40 to rise back towards 6.45/46 initially and then higher eventually towards 6.50+ levels. Watch price action near support at 6.42/40 levels in the near term.

USDINR (73.04) could have scope for a test of 72.80 on the downside before rising back towards 73.30/50 in the medium term. Only and if only a break below 72.80 is seen, our view of a bounce back from here may go wrong. Watch for some Rupee strength while Dollar trades weak.

INTEREST RATES

The US Treasury yields continue to trade stable. We retain our view seeing a broad sideways range on the yields. Within this range, the chances are high for the yields to move up in the coming days. The German Yields are moving up gradually. The view is bullish and there is room for further rise. The 10Yr GoI remains stable above its intermediate support which has to hold to see a corrective rise before resuming the downtrend.

The US 2Yr (0.15%), 5Yr (0.82%), 10Yr (1.64%) and 30Yr (2.36%) Treasury yields continue to trade stable. 1.5%-1.45% (10Yr) and 2.2%-1.15% (30Yr) are the important supports. While above these supports a rise to 1.8% (10Yr) and 2.5% (30Yr) cannot be ruled out. A break above 1.7% (10Yr) and 2.4% (30Yr) can trigger this rise. Overall we expect the Treasury yields to oscillate in a broad range.

The German 2Yr (-0.66%), 5Yr (-0.51), 10Yr (-0.11%) and the 30Yr (0.46%) yields continue to move up gradually. This keeps our bullish view intact of seeing 0% (10Yr) and 0.55% (30Yr) on the upside in the coming weeks. Supports are at -0.20% (10Yr) and 0.35% (30Yr).

The 10Yr GoI (5.9766%) remains stable above the key support level of 5.95%. The yield has to sustain above 5.95% to see a corrective rise to 6%-6.02% and higher levels. A break below 5.95% can drag the 10Yr GoI to 5.9% – the fall that we have been expecting for some time.