Market Morning Briefing: Pound Has Fallen Sharply Unable To Test Or Rise Above 1.40

STOCKS

Equities broadly retain their overall sideways range. While our bias remains bullish to see an upside breakout of the ranges in equities, a fresh trigger seems to be needed for that. Dow remains at the upper end of its 33000-35100/250 range and has to break above 33250 to move up strongly. DAX oscillates at the middle of its 15200-15800 range. Nikkei has bounced back after testing the lower end of its 27000-29500 range last week. Shanghai can trade in the 3300-3460 range. Sensex and Nifty are likely to retain their 52000-53200 and 15600-15900 range respectively.

Dow (34935.47, −149.06, -0.42%) hovered around 35000 all through last week. 35100 and 35250 are important resistances. We expect the Dow to break 35250 (revised up from 35100 mentioned last week) and rise to 36000 going forward. Inability to break 35250 can drag the Dow to 34500-34000 again. It will then continue to keep the index inside the broad 33000-35100/250 range for some more time.

DAX (15544.39, −96.08, -0.61%) oscillates at the middle of its 15200-15800 range over the last few days. We expect DAX to break this range on the upside and move up towards 16000-16200. The view will turn bearish only on a break below 15200.

The support at 27000 has held very well and Nikkei (27733.32, +449.73, +1.65%) has bounced back. A strong rise above 28000 from here will reduce the danger of seeing the fall to 26000 that we had cautioned last week. For now the 27000-29500 range remains intact and a break above 28000 can take the index towards the upper end of this range.

Shanghai (3416.92, +19.56, +0.58%) has risen back well after testing 3300 last week. 3450-3460 will be a crucial resistance which will have to be broken in order to bring back the bullishness and negate the danger of seeing the deeper fall to 3200 cautioned last week. For now 3300-3460 is the possible trading range that can be seen over the next few days.

Sensex (52586.84, −66.23, -0.13%) continues to trade stable within the 52000-53200 range. We retain our bullish bias to see an upside break of this range above 53200 and a rise to 54000 eventually. 52000 and 51000 are strong supports.

Nifty (15763.05, −15.40, -0.01%) remains stable within the 15600-15900 range. With strong supports at 15600 and 15500, the bias is bullish to see a break above 15900 and a rise to 16000-16200 going forward.

COMMODITIES

Commodities have fallen and trade lower. Brent and WTI remains below respective immediate resistances at 76-77 and 74 respectively and can come down towards 72-70 and 70-69 soon. Gold has held below 1840 and can test 1800-1780 which is a crucial support zone. Silver may remain within the broad 24.50-26 region while Copper is stuck within 4.60-4.40 for now.

Brent (74.27) and WTI (72.95) have fallen from 76+ levels and 74 respectively. Brent needs to break below 74 to again turn bearish towards 72-70 in the near term while WTI is likely to hold below 74 and head towards 69 in the near term.

Gold (1814.70) faced stiff rejection from 1840 on late trade on Friday. While 1840 holds, we expect a fall to 1800-1780 which is a crucial support zone that needs a close watch. In the longer run, while above 1780-1800, there would be hope for bullishness else a break below 1780, if seen will make the price vulnerable to a sharp fall in the longer run.

Silver (25.47) fell from immediate resistance at 26 last week and while that holds, a fall back to 25.0-24.50 cannot be negated. A range of 24.50-26.00 may hold for medium term.

Copper (4.4865) is stuck within 4.40-4.60 region and may trade so for a few more sessions. Thereafter a fall towards 4.20 looks possible while resistance at 4.60 holds. Only a sustained break above 4.60, if seen will indicate bullishness towards 4.80 or higher in the longer run but such a rise looks less likely.

FOREX

Currencies look mixed today. Dollar index may remain within 91.75-92.25 before breaking on either side while Euro is bullish while above 1.1850. Aussie and Dollar Yen can remain within 0.73-0.74 and 109-110 respectively. EURJPY holds below 130.50 and unless a break above 130.50 is seen view is to see a ranged movement between 130.50 and 129. USDINR needs to break below the 74.60-74.40/20 region to head lower towards 74.0-73.80 region. Else the range may hold on for a few more sessions.

Dollar Index (92.088) has bounced from 91.78. A range of 92.25-91.75 may hold just now but the index needs to break below 91.75 to head to 91.50 and even lower in the coming sessions. A rise above 92.25 may take it higher to 92.50 before a dip from there is seen. For now watch price action from 91.75-92.25 range.

Euro (1.1869) has dipped from 1.1908 but is likely to hold above 1.1850 in the near term slowly turning bullish towards 1.1950. While above 1.1850, view is bullish.

EURJPY (130.19) holds below 130.50 which has been tested over the last 3-sessions. A range of 130.50-130 may hold for the next few sessions while a break below 130 if seen may take it down towards 129.50-129. Watch price action near 130.50.

Dollar-Yen (109.65) is holding below 110 and could test 109 before bouncing back from there. 110-109 could be the near term trade region.

Aussie (0.7342) fell from 0.74 but has bounced from 0.7329 today. A range of 0.74-0.73 is likely to hold for now.

Pound (1.3894) has fallen sharply unable to test or rise above 1.40. While below 1.40, view is bearish towards 1.3850-1.38 before a bounce back is seen in the longer run.

USDCNY (6.4666) has risen well from 6.45 as expected and could again be headed towards 6.48/49 on the upside. A sideways broad range of 6.49-6.45 may hold for now.

USDINR (74.42) held above 74.20 last week but the view is bearish for a fall towards 74.0-73.80 in the medium term. We need to keep a close watch today to see if the pair continues to trade between 74.60-74.40/20 or attempts to break lower.

INTEREST RATES

The US Treasury yields have dipped and can test their key supports within the overall downtrend. We expect the supports to hold and see a corrective rally in the coming weeks before the overall downtrend resumes. The German yields are inching closer to their supports. A corrective bounce can be seen in the short-term before a fresh fall happens. The 10Yr GoI is likely to move up amid muted trading and the 5Yr is also heading up towards 5.76% in line with our expectation.

The US 2Yr (0.18%), 5Yr (0.69%) and 10Yr (1.25%) Treasury yields have dipped on Friday while the 30Yr (1.90%) remained stable. Our view remains the same. We see supports at 1.2%-1.1% (10Yr) and 1.9%-1.8% (30Yr) which are likely to hold for now. A corrective bounce to 1.45%-1.5% (10Yr) and 2.1%-2.2% (30Yr) is a possibility in the coming weeks. Thereafter the broader downtrend can resume again taking the yields below the above mentioned support levels.

The German 2Yr (-0.77%), 5Yr (-0.75%), 10Yr (-0.46%) and 30Yr (0.01%) yields have dipped further. The 10Yr and 30Yr have come closer to their key supports within their broader downtrend at -0.45%/-0.5% and 0%/-0.05% respectively. We expect the yields to see a corrective bounce from there to -0.30%/-0.25% (10Yr) and 0.10% (30Yr) in the coming weeks. Thereafter a fresh fall can happen again.

The 10Yr GoI (6.2273%) can test 6.3%-6.32% while it remains above 6.2% amid muted trading. The 5Yr GoI (5.7359%) has moved up further and keeps our view intact of testing 5.76%-5.77% on the upside. Thereafter a pull-back is possible.