Market Morning Briefing: Dollar-Yen Continues To Fall

STOCKS

Equities seem to be lacking strength to move up strongly. Dow has come down and needs to sustain above 34000 to move up and test 34700-35000. DAX hovers around 15600 and needs to break 15800 to move higher and avoid a test of 15400 and lower levels. Nikkei has dipped below 29000 and can fall to 28500 and even 28000 again. Shanghai has failed to break above 3625 and can now move down towards 3550-3500. Sensex and Nifty have to break above 53000 and 15900 respectively to gain bullish momentum. While these resistances hold, a near-term dip and a sideways consolidation is possible for some time. However, as mentioned yesterday Sensex and Nifty look relatively stronger and can outperform others.

Dow (34283.27, −150.57, -0.44%) has come-off yesterday. Our view remains the same. The Dow has to sustain above 34000 and break above the 34700-35000 resistance zone to gain bullish momentum and rise towards 36000. Else a fall back to 33000 again cannot be ruled out.

DAX (15554.18, −53.79, -0.34%) continues to oscillate around 15600. Inability to see a sustained rise above 15600 can drag the index to 15400. In that case DAX will remain under pressure to break 15400 and fall to 15200-15000 which will then delay our preferred rise to 16000-16100. We will have to wait and watch.

Nikkei (28795.66, −252.36, -0.87%) has declined sharply below 29000 and is under pressure to test 28500 and revisit 28000 levels. The rise to 29500-30000 is getting delayed. 28000 is a crucial support which will have to hold in order to avoid a deeper fall to 27000-26000 that we have been cautioning for some time.

Shanghai (3584.85, −21.53, -0.60%) has come down below 3600. The 3600-3625 resistance zone has held very well. While below 3600, a fall back to 3550-3500 can be seen again and Shanghai can trade in the range of 3500-3625. Also while below 3625, the chances of the downside extending upto 3450-3425 cannot be ruled out before the broader uptrend resumes.

Sensex (52735.59, −189.45, -0.36%) and Nifty (15814.70, −45.65, -0.29%) failed to sustain the break above their crucial resistance levels of 53000 and 15900 respectively. Our view remains the same. A sustained break above 53000 (Sensex) and 15900 (Nifty) is needed to see a further rise to 54000 (Sensex) and 16000-16200 (Nifty). Else a dip and a sideways consolidation between 52000-53000 (narrow) or 51000-53000 (broad) on Sensex and 15600/700-15900 (narrow) or 15400-15900 (broad) on Nifty can be seen for some time before the above mentioned rise happens.

COMMODITIES

Commodities have dipped slightly and look weak today. Gold trades near support of 1760/80 which needs to hold a produce a bounce to 1800 or higher to avoid any further fall from here else we might have to allow for a fall to 1740/20 eventually. Silver trades between 25.8-26.50 region and is likely to continue while Copper is also ranged within 4.40-4.10. Crude prices have fallen sharply from levels seen yesterday s $75 holds well in WTI. WTI can come down to 71-70 levels before bouncing back again and this could keep Brent prices low for sometime.

Brent (74.38) has fallen back after briefly rising above 76 yesterday. We may expect another attempt to rise towards $77-80 in the medium term before any sharp decline is seen in the loner term indicating that a possible peak could be in place. On WTI (72.65) $75 seems to be holding well for now and while that holds, a dip to 71-70 could be possible in the near term before again attempting to rise again. We may expect subdued movement in crude price for now.

Gold (1774.80) is stuck and trades along the trend support near 1760-1780 region and needs to bounce sharply towards 1800 or higher to get some upside momentum for the near term. Else, any fall below 1760 would drag the price lower towards 1740-1720 eventually in the medium term. Watch price action near immediate support of 1760/80.

Silver (26.12) has risen a bit but trades within the narrow range of 25.80-26.50 which is likely to continue for some more time. Immediate view is to see some sideways consolidation.

Copper (4.2615) has dipped slightly. We continue to look for a range of 4.10-4.50 to hold for the very near term within which a fall to 4.10 looks possible initially.

FOREX

Dollar Index trades higher while most other currencies trades weak and looks bearish against the Dollar. If the index manages to break above 92, it can head towards 93 dragging down Euro towards 1.1850 and indicating weakness for Aussie, Pound, EURJPY too towards 0.75, 1.38 and 131 respectively. USDCNY is rising towards 6.48. USDINR has immediate resistance at 74.30/35 which if holds can produce a fall to 74-73.80. But failure to fall from 74.30/35 could take it higher towards 74.40/50. Watch price action near 74.30/35 for now.

Dollar Index (91.939) has risen to almost test 92 and if it manages to break above 92, we will have to allow for an eventual rise to 93 before any decline sets in. A break above 93 would continue bearishness on other currencies for the near term. Watch price action near 92 now.

Euro (1.1913) is falling an could test 1.19 in the very near term. If it manages to break below 1.19, we will have to allow for a dip to 1.1850/70 in the medium term. View is bearish while below 1.1950.

EURJPY (131.66) is falling too and could test 131.50-131 on the downside. View is bearish.

Dollar-Yen (110.49) continues to fall and could be headed towards 110-109.50 which is an immediate support and could produce a bounce back towards 112. For now, watch for a possible fall to 110-109.50.

Aussie (0.7555) looks weak and can fall towards 0.75 or lower in the medium term.

Pound (1.3867) has dipped and could test 1.38 on the downside before again bouncing higher from there. Near term looks weak.

USDCNY (6.4615) has bounced well and while above 6.4480, we may expect an eventual rise in the pair towards 6.48. View is bullish while above 6.4480.

USDINR (74.1950) may continue to trade within 74.0-74.30 today also. Any break above 74.30, if seen can take the pair higher towards 74.40/50 on the upside. On the very near term charts, there is trend resistance near 74.30/35 which if holds could produce a fall towards 74.0-73.80 in the medium term. Immediate view is to see a sideways movement within the 74.30-74.00 range.

INTEREST RATES

The US Treasury yields have come down across tenors and seem to lack strength to move up further. Broadly we expect the yields to remain in a sideways range for some time before breaking lower over the medium-term. The German yields have declined across tenors. But supports are ahead which can limit the downside and keep the broader uptrend intact. The 10Yr GoI has risen sharply towards the upper end of its 6%-6.06% range. It will have to be seen if it can break this range on the upside and see an extended rise contrary to our expectation and delay the fall below 6%.

The US 2Yr (0.25%), 5Yr (0.90%), 10Yr (1.48%) and 30Yr (2.10%) Treasury yields have come-off across tenors. The yields seem to lack strength to see the expected rise within the range towards 1.6% (10Yr) and 2.2%-2.25% (30Yr). As mentioned yesterday, broadly the 10Yr can trade in the range of 1.4%-1.6% (narrow) or 1.3%-1.7% (broad) and the 30Yr in 1.9%-2.25% for a few weeks. The bias is bearish to see yields breaking this range on the downside eventually.

The German 2Yr (-0.66%), 5Yr (-0.58%), 10Yr (-0.19%), 30Yr (0.31%) yields have declined sharply across tenors. Supports are at -0.30% (10Yr) and 0.25% (30Yr) which can limit the downside. While above these supports our broader bullish view is intact to see -0.10% and 0% (10Yr), 0.40% and 0.55% (30Yr) on the upside.

The 10Yr GoI (6.0562%) has risen sharply towards the upper end of the 6%-6.06%. On the charts, the chances are turning high for the yield to break 6.06% and see an extended rise to 6.08%-6.1% contrary to our earlier view of seeing a reversal from 6.06% itself. Such a rise will delay the expected fall below 6%. We will have to wait and watch the price action in the coming sessions.