Market Morning Briefing: Aussie Has Bounced Too From 0.71 In Line With Other Currencies

STOCKS

Equities have recovered a bit after seeing a sharp fall last week. We may expect the bounce to hold for now and take the indices to higher levels in the near term.

Dow (35120.08, +225.96, +0.65%) has bounced back well from low of 34867 seen last week. While the support holds, a rise to 35500-35750 cannot be negated. As mentioned last week, the corrective dip was indeed short lived.

DAX (15808.04, +42.23, +0.27%) has held above 15600 and while that holds, a rise to 16000 is possible again in the coming sessions.

Nikkei (27479.85, +466.60, +1.73%) has bounced back sharply after making a low of 26954.81 on Friday. while above 27000 the view is bullish to see a test of 28000 eventually.

Shanghai (3466.72, +39.39, +1.15%) is holding above 3400. A bounce towards 3550-3600 is possible from here..

Nifty (16450.50, -118.35, -0.71%) tested 16376.05.on Friday but bounced back from there. The index has support at 16350 and deeper support at 16200 which can hold and limit the downside. While above 16200/350, the view is bullish to see 16500-16600.

Sensex (55329.32, -300.17, -0.54%) has come down in line with our expectations but bounced back before falling to levels below 55000. The support at 54500-54000 continues to remain crucial but while above 55000, view is bullish towards 56000 in the coming sessions.

COMMODITIES

Slight recovery seen in commodities but we will have to see if it is a temporary corrective bounce within the overall medium term downtrend or whether the rise may continue to hold. Brent and WTI have risen well and have scope for a test of $68-69 and $64-66 respectively before again declining lower. Similar interim resistances are seen on Gold, Silver and Copper near 1800/10, 23.50/60 and 4.20 respectively which needs a close watch.

Brent (65.89) and WTI (62.70) have both bounced slightly after testing 64.60 and 61.74 respectively. Overall view remains bearish for a fall towards $60 on Brent and $58 on WTI but the small corrective bounce can hold for now and lead to a rise to $68-69 and $64-66 before declining lower again. Overall medium term trend still points to the downside.

Gold (1787.30) has bounced from 1778 and is likely to remain within 1810-1770 region for now. Note crucial immediate resistance near 1800/10 which will have to break on the upside for Gold to rise higher. Else a sharp fall could be on the cards.

Silver (23.12) has bounced slightly and could test 23.50/60 before again declining lower towards 22.50 or even 22. A break above 23.50/60 will have to be seen and sustained to negate further fall below 23. Watch price action near 23.

Copper (4.1815) dropped briefly below 4 but managed to bounce back in line with our expectations. A test of 4.20 is likely in the next few sessions but whether Copper will break above that and sustain will have to be seen. Failure to rise above 4.20 will drag it back towards 4.0-3.80 in the near term.

FOREX

Dollar Index has dipped from 93.73 impacting most currency pairs to strengthen slightly against the Dollar. EURJPY, Aussie, Pound, Chinese Yuan and Rupee can all strengthen a bit against the Dollar but we would have to keep a close watch to see if this would sustain or is short lived.

Dollar Index (93.32) tested 93.73 last week before falling from there. A dip to 93.20 looks possible followed by a bounce back towards 94-94.50 in the medium term. Watch price action near 93.20.

Euro (1.1716) has bounced from 1.1664 and could head towards 1.1750-1.1780 in the near term. A broad range of 1.18-1.1650 may hold for the near term. It would be important to see if the currency manages to rise past 1.1770-1.180 or falls back from those levels.

EURJPY (128.69) is holding above support at 128 which if holds could produce a corrective rise towards 129 in the near term. Unless a decline below 128 is seen, we will not bring in a possible fall to 126 into the picture. For now a ranged movement within 128-129 looks possible.

Dollar-Yen (109.82) continues to fluctuate within 110.50-109 zone. We may expect the range to hold for some more time before the pair gives more clarity on further direction an breaking either side of the range.

Aussie (0.7158) has bounced too from 0.71 in line with other currencies. A rise to 0.72-0.7250 is possible.

Pound (1.3643) is holding above 1.36 and while that holds, a bounce to 1.37-1.3750 looks likely in the near term. Immediate view is bullish while above 1.36.

USDCNY (6.4903) has fallen sharply from 6.5040. A test of 6.48/47 can be possible in the near term.

USDINR (74.39) can fall back towards 74.20 today as most currency pairs have recovered a bit compared to sharp movements seen last week. While below 74.40/45, a test of 74.30/20 looks likely again.

INTEREST RATES

The US Treasury yields have inched up on Friday but are likely to dip again to test their crucial supports while they remain below their immediate resistances. The price action near the supports will need a close watch to see if the yields can bounce-back or not. The US Federal Reserve Chairman, Jerome Powell’s speech at the Jackson Hole Symposium on Friday this week will be a crucial event to watch to see if any hint on tapering and rate hike is given. The German yields are poised at their crucial support. Inability to bounce from here can drag the yields without seeing a corrective rally that we had been expecting. The 5Yr GoI has risen-back sharply on Friday and can move up further if the bounce sustains.

The US 2Yr (0.23%) and 5Yr (0.79%), (1.27%) and the 30Yr (1.87%) Treasury yields have inched up on Friday. We retain our view of seeing a test of 1.8% on the 30Yr while it remains below 1.9%. Similarly, the 10Yr can test 1.18% while it trades below 1.3%. As mentioned on Friday, the price action at 1.8% (30Yr) and 1.18% (10Yr) will be very important to watch whether the yields can bounce-back from there or not.

The German 2Yr (-0.76%), 5Yr (-0.75%), 10Yr (-0.50%) and 30Yr (-0.06%) yields remain lower. The 10Yr is at the crucial support level of -0.5% and the 30Yr is just below the key -0.05% support. Inability to bounce-back sharply from here will negate our view of seeing a corrective rally before a fresh fall is seen. In turn the overall downtrend can continue further and drag the yields to -0.6% (10Yr) and -0.2% (30Yr) from here itself.

The 5Yr GOI (5.6902%) extended the fall as expected towards 5.62% and had risen-back sharply from the low of 5.6281% on Friday. A further rise to 5.73%-5.74% and 5.76% is possible in the coming days while this bounce sustains.