Market Morning Briefing: Dollar-Yen Has Dipped Below 111

STOCKS

Global equities continue to trade mixed and seem to lack strength. However, Sensex and Nifty remain relatively stronger among them and could outperform if they break their immediate resistances. 53000 on Sensex and 15900 on Nifty are important levels to watch. Nikkei and Shanghai lack strength to see a strong rise. Nikkei can fall to 28500-2800 while it remains below 29000. Shanghai looks vulnerable to break the 3500-3625 range on the downside. Dow was closed yesterday and need to see if it can breach 35100 this week. DAX continues to oscillate around 15600 within its 15400-15800 range.

Dow (34786.35) was closed yesterday. It will have to be seen if it can rise past the 35000-35100 resistance zone from here or not this week. Else, as mentioned yesterday, a fall back to 34000-33500 again cannot be ruled out.

DAX (15661.97, +11.88, +0.08%) continues to oscillate around 15600. The immediate outlook is mixed. 15400-15800 is the possible range of trade. A breakout on either side of this range will decide whether the index can move up to 16000-16200 or fall to 15200-15000 from here.

Nikkei (28732.57, +134.38, +0.47%) has bounced today but needs to rise past 29000 from here to ease the downside pressure of breaking below 28500 and falling to 28000. We will have to wait and watch for a few sessions. While below 29000, a fall to 28500-28000 cannot be ruled out in the coming days. As mentioned yesterday, 28000 is a strong support while above which the long-term trend will still remain up.

Shanghai (3520.17, −14.15, -0.4%) has come-off today and seems to lack strong follow through rise. This keeps alive the danger of the index breaking the 3500-3625 range on the downside and extend the fall to 3450-3400. However, from a long-term perspective, the trend will be up to target 3700-3800 on the upside as long as the index stays above 3400.

Sensex (52880, +395.33, +0.75%) and Nifty (15834.35, +112.15, +0.71%) have risen sharply and are coming closer to their key resistances. 53000 on Sensex and 15900 on Nifty will have to be broken for the indices to gain fresh momentum and rise further to 54000 and 16000-16200 respectively. While these resistances hold, the 52000-53000 (Sensex) and 15600-15900 (Nifty) range can continue to hold for some more time.

COMMODITIES

Crude prices rose sharply as the OPEC+ meeting scheduled yesterday saw dispute between Saudi Arabia and UAE who opposed each other leaving the OPEC+ to abandon the meeting without any final conclusion on output cuts. UAE is opposing Saudi Arabia to extend the current deal to 2022 with phased increased in production. This clash between the two major countries could keep taking crude prices higher. Copper too rose sharply as the inventories in warehouses monitored by the Shanghai Futures Exchange fell 7.3% from last Friday. Copper, if breaks above 4.40/50 can be headed higher towards 4.60/65 else can face rejection in the next few sessions. Gold and Silver look bullish too for the near term and can rise towards 1800-1820 and 27-28 respectively.

Brent (77.58) and WTI (74.99) have risen sharply as the OPEC+ ended the meeting without any conclusion on production cuts. The clash seen between UAE and Saudi Arabia could continue to boost oil prices and we may expect Brent to soon test $80 on the upside before a dip is seen from there. WTI has risen above $75 and could move up too towards $77/78 before any decline is seen in the medium term. Immediate view is bullish.

Gold (1797.50) has risen well and could rise towards 1820 on a break above 1800. Immediate view is bullish.

Silver (26.70) is headed towards 27-28 in the near to medium term. View is bullish for now.

Copper (4.3630) has risen sharply too in line with bullishness seen in other commodities. It has come up to test upper immediate resistance near 4.40/50. Any break above 4.50 seen in the near term could turn bullish towards 4.60/80 on the upside else a decline from 4.50 could be in place this week itself. Watch price action near 4.50/40.

FOREX

Dollar Index has dipped taking Euro higher. Dollar Index may head towards 92 while Euro can test 1.19. EURJPY looks ranged without any clarity of which way to go. USDCNY trades lower and a stronger Euro and Chinese Yuan could be positive for Rupee today bringing down USDONR towards 94. Pound and Aussie have risen well too and looks bullish for the very near term.

Dollar Index (92.16) has dipped in line with strong commodities today but could be short lived as we may expect a bounce from 92 in the near term. A sustained break below 92 is needed for the index to turn bearish towards 91.50 or lower in the longer run. For now, watch for a bounce from 92.

Euro (1.1872) has risen slightly as the Dollar Index dipped. Euro could have scope for a rise towards 1.1880-1.190 before any decline is seen again from 1.19. Any break above 1.19, if seen will be bullish for the medium term.

EURJPY (131.62) has been stable between 131.40-132 region and view is unclear just now for a possible break out on either side of the range. We will have to wait and watch for further clarity on movement from current levels.

Dollar-Yen (110.84) has dipped below 111 and could be headed towards 110.50 or lower in the near term before again bouncing back from there.

Aussie (0.7559) has risen well and while Aussie heads higher we may expect a test of 0.76-0.7650 soon on the upside. Immediate view is bullish.

Pound (1.3878) has bounced well and looks bullish for a rise towards 1.39-1.3950 n the near term. View is bullish for the near term.

USDCNY (6.4630) has dipped and could fall towards 6.45 before again rising towards 6.47/48 in the medium term.
Strength in Chinese Yuan and Euro against the dollar looks positive for

USDINR (74.3050) and could bring down the pair towards 74. Any break below 74 if seen would indicate that a near term top is in place and the pair could be headed lower in the medium term. A rise above 74.40 is needed for the pair to again rise higher but that looks less likely just now.

INTEREST RATES

The US markets were closed yesterday. It will have to be seen if the 10Yr Treasury yield can sustain above its important support this week or not which is needed to avoid a deeper fall from here. The German yields have bounced yesterday and need to see if it can get a strong follow-through rise from here to ease the danger of breaking their important supports. The 10Yr GoI has risen on low volumes but has to breach 6.1% to move up further. The 5Yr GoI has resistance at 5.78%-5.79% from where it can reverse lower again.

The US 2Yr (0.23%), 5Yr (0.86%), 10Yr (1.44%) and 30Yr (2.06%) Treasury yields were closed yesterday. It will have to be seen if the 10Yr can manage to sustain above its crucial support region of 1.4%-1.35% this week. We will have to wait and watch.

The German 2Yr (-0.67%), 5Yr (-0.59%), 10Yr (-0.21%), 30Yr (0.29%) yields have bounced-back across tenors. A strong follow-up rise from here is needed to reduce the danger of breaking below the supports at -0.30% (10Yr) and 0.25% (30Yr) mentioned yesterday. A break below the above mentioned supports can drag the yields lower to -0.45% (10Yr) and 0.10% (30Yr) in the coming days. It will also negate our bullish view of seeing a rise to 0% (10Yr) and 0.55% (30Yr).

The 10Yr GoI (6.0877%) has risen sharply above 6.06%, on low volumes though. It will have to be seen if it can rise past 6.10% from here which will then pave way for further rise and delay the break below 6% that we had been expecting. The 5Yr GoI (5.7594%) remains higher and has room to test 5.78%-5.79% on the upside and then reverse lower.