Market Morning Briefing: Dollar Index Has Risen To Test 93

STOCKS

Dow has to sustain above 35000 to keep the chances alive of breaking above 35250. Else a fall is possible. DAX seems to lack strength to break above 15800 and can retain its 15200-15800 range for some more time. Nikkei can rise within its 27000-29500 range. Shanghai also looks positive to move up towards 3550-3600 in the near-term. Sensex and Nifty are consolidating at higher levels and continue to look bullish.

Dow (35101.85, −106.66, -0.30%) has come-off yesterday. It has to sustain above 35000 to keep alive the chances of breaking above 35250 and see a rise to 36000 that we have been expecting. A fall below 35000 can drag the Dow down to 34250-34000 and will keep the broader 33000-35250 range intact for some more time.

DAX (15745.41, −16.04, -0.10%) tested 15800 for the second consecutive day but did not break above it. A fall below 15600 will indicate that the 15200-15800 range is still intact and can drag DAX down towards 15400-15200 – the lower end of the range in the coming days. It will then delay the expected break above 15800 and the rise to 16000-16200 that we have been expecting.

Nikkei (27905.73, +85.69, +0.31%) has come-off sharply from the high of 28128.61. The bias is positive to see a rise towards the upper end of its 27000-29500 range. A sustained break above 28000 can trigger this rise. While below 28000, we remain cautious to see if Nikkei can break below 27000 and see a deeper fall to 26000.

Shanghai (3495.09, +0.46, +0.013%) has risen above 3480 and looks bullish in the near-term to test 3560-3580 and even 3600 on the upside. From a bigger picture, Shanghai will have to rise past 3600 to become bullish again. Else a pull-back to 3400-3300 again cannot be ruled out. Price action in the 3580-3600 region will need a close watch.

Sensex (54402.85, +125.13, +0.23%) consolidates above 54000 over the last few days. The view remains bullish to see a rise to 56000. A sustained break above 54500 can accelerate the rally. Support at 53500-53000 can limit the downside.

Nifty (16258.25, +20.05, +0.12%) remains stable above 16200. Outlook is bullish to see a rise to 16500-16600. A decisive break above 16300 will pave way for that rise. Immediate support is at 16150 and then at 15900-15800. Nifty has to fall below 15800 to turn the outlook negative.

COMMODITIES

Commodities trade lower today with Copper, Gold and Silver still looking bearish for the near term while Dollar strengthens. Gold can remain bearish below 1750 while Silver can trade below 25 and Copper can test 4.20 (initial support) or even 4.10/00 (deeper support zone) before bouncing back to higher levels. Crude prices look bearish too towards 65 (Brent) and 60 (WTI).

Brent (69.02) and WTI (66.66) both trade lower today. We may expect a fall towards 65 on Brent and 60 on WTI if the fall continues in the near term. Immediate resistance are seen near 70-72.50/73 on Brent and 69/70 on WTI.

Gold (1735.10) has bounced well from yesterday’s low of 1677. Although the corrective rise is in place, we are bearish on Gold while below 1750/60. A strong Dollar in the near term can prevent any rise in Gold indicating bearishness for this week and possibly the next.

Silver (23.51) tested 22.35 breaking below 23, but has bounced well from there. If the bounce sustains, it can rise towards 24-25 can be possible. But if Dollar Index continues to strengthen, it is bearish for Silver for an eventual fall towards 21-20 in the medium term.

Copper (4.2995) has fallen in line with our expectation yesterday. While the other commodities trade lower, Copper cannot be left out. It is heading towards out mentioned support at 4.20 from where a reversal looks possible. Any fall below support at 4.20, can make it vulnerable to test 4.10-4.00 in the medium term. Watch price action near 4.20.

FOREX

Dollar Index looks strongly bullish but we would wait to watch if it faces any rejection from 93.30/40 region or move up straight towards 94.0-94.50 on the upside. Euro on the other hand has fallen below 1.1750 as it could not sustain the rise seen yesterday. A fall to 1.17-1.16 cannot be negated while the Dollar continues to trade strong. Aussie and Pound look bearish towards 0.73-0.7286 and 1.38-1.37 respectively. USDJPY can rise to 110.50/80 before falling off from there. USDCNY can rise to 6.49/50. Weakness in Chinese Yuan and Euro can drag Rupee lower today taking t beyond 74.40. USDINR offshore rate quotes 74.43 and could indicate a sharp gap up opening today on the onshore markets and eventually take it higher to 74.60/70.

Dollar Index (92.99) has risen to test 93 and could be headed towards initial resistance near 93.30/40 which if manages to break could be strongly bullish towards 94.0-94.50 in the next 1-2 weeks.

Euro (1.1732) rose to 1.1769 yesterday but could not sustain higher as it fell sharply to below 1.1750 and is heading towards 1.17 now. A break below 1.17 would drag Euro further down towards 1.16. View is strongly bearish for the near term.

EURJPY (129.45) has bounced a bit but we cannot negate a fall to support near 128.70 before bouncing back h=sharply from there. On the upside, 130.50 continue to hold as important resistance.

Dollar-Yen (110.30) trades higher and at immediate short term resistance. A break above 110.30 will eventually take the pair higher towards 110.50/80 on the upside before a reversal is seen. Immediate view is bullish while dollar Index heads higher.

Aussie (0.7319) looks weak and could fall towards 0.73-0.7286 initially.

Pound (1.3838) is bearish as it falls towards 1.37. Watch for any interim support near 1.3790-1.3800. Resistance below 1.40 is holding strongly.

USDCNY (6.4795) has dipped after a test of 6.4881 yesterday. We continue to look for a range of 6.45-6.49/50 within which a test of the upper end of the range looks more likely before a fall is seen in the medium term. Watch for a rise to 6.49/50 in the next few sessions.

USDINR (74.27) rose to test 74.2850 on the onshore markets yesterday in line with our expectations of a rise to 74.25/30 that looked like an immediate resistance yesterday. But the weakness in Euro and Chinese Yuan has been significant and can drag Rupee too beyond 74.30 today. USDINR can test 74.50/60/70 on the upside on a sharp upmove that looks most likely today. The offshore rate quotes at 74.43 just now indicating a possibly higher opening on the onshore markets today. Rupee weakness in on the cards for the next few sessions contrary to our expectation of 74.25/30 to hold (mentioned yesterday)

INTEREST RATES

The US Treasury yields sustain higher. Though there is an immediate resistance ahead, the chances of an extended rally breaking above the immediate resistances cannot be ruled out. The US Consumer Price Index (CPI) inflation data release tomorrow will need a close watch to see if it triggers an extended rally or not. The German yields are holding above their supports and can see a corrective rally in the coming days. The 5Yr GoI has come-off sharply and can test 5.7%-5.69% in line with our expectation and then can bounce-back.

The US 2Yr (0.22%), 5Yr (0.79%), 10Yr (1.31%) and the 30Yr (1.96%) Treasury yields remain higher. The 10Yr has immediate resistance at 1.35%. A break above it can see an extended corrective rise to 1.4%-1.45%. Similarly, the 30Yr can move up towards 2.1%-2.15% on a break above 2%. Thereafter the broader downtrend in the Treasury yields can resume with a fresh fall.

The German 2Yr (-0.76%), 5Yr (-0.73%), 10Yr (-0.46%) and 30Yr (-0.02%) yields remain stable after bouncing back sharply on Friday. We retain our view of seeing a corrective rally to -0.30%/-0.25% (10Yr ) and 0.10% (30Yr) in the coming weeks. Supports at -0.45%/-0.40% (10Yr) and -0.05% (30Yr) are holding well as of now.

The Indian 5Yr GoI (5.7290%) has come-off sharply in line with our expectation failing to break above 5.78% yesterday. Our view of seeing a test of 5.7%-5.69% on the downside remains intact. Thereafter a bounce-back move to 5.74% is possible.