Market Morning Briefing: Dollar-Yen Continues To Hold Within 110.50-109 Zone

STOCKS

Equities globally trade higher and look bullish for the near term. Dow and Dax may target 35500/750 and 16000 respectively while Nikkei, Shanghai, Nifty and Sensex look bullish too towards 28000, 3520/40, 16600/700 and 56000 respectively. Immediate view is bullish and we may expect further rise today.

Dow (35335.71, +215.63, +0.61%) has been rising in line with our expectations. A break above 35250 now shows good signs of strength for the near term. We may expect a target of 35500-35750 to be seen soon.

DAX (15852.79, +44.75, +0.28%) has been rising too and could head towards our expected 16000 soon. Immediate view is bullish.

Nikkei (27763.43, +269.19, +0.98%) has risen further and is heading towards 28000. A strong break above 28000, if seen can take the index up to test 29000 too. Failure to break above 28000 can drag the index down to 27000 or lower in the longer run. Watch price action near 28000.

Shanghai (3509.51, +32.38, +0.90%) has bounced well and needs to break above 3520 to indicate bullishness towards 3540-3560 in the coming sessions. Watch price action near 3520.

Nifty (16496.45, +45.95, +0.28%) tested 16592 but came off from there to close lower. A break above 16500 is possible today again to eventually see a rise towards 16600/700 in the near term. Immediate view is bullish.

Sensex (55555.79, +226.47, +0.41%) has risen as expected and could head towards 56000 in the coming sessions.

COMMODITIES

Commodities trade higher today. Rise seen in Gold, Silver, Copper and crude prices. Brent and WTI can face rejection from 70-72.50 and 66-67 levels respectively while Gold may test crucial resistance at 1810 which needs to break in order to move further up. Silver may test 24 before coming down while copper if sustains above 4.20 can head towards 4.40/50. Overall immediate view is bullish for most commodities mentioned below.

Brent (69.04) has risen as expected but broke above 69 mentioned yesterday. It tested 69.48 before coming off from there. While above 69, there is scope to rise towards medium term resistance zone of 70-72.50 on the upside before facing rejection from there.

WTI (65.87) also tested 66.30 on the upside before coming off from there. While below 66-67 levels, immediate view is bearish for a fall towards 64.

Gold (1805.20) has risen in line with our expectations of seeing a rise towards 1800/1810. Watch immediate resistance at 1810 now, which can cap the upside and produce a rejection soon. The broad range of 1810-1770 remains intact unless a break on either side is seen.

Silver (23.64) has bounced in line with our expectations of seeing a bounce to 23.50/60 yesterday. If the price sustains above 23.60, it can move higher towards 24 else a sharp fall to 23 cannot be negated. Watch price action while above 23.50/60.

Copper (4.2375) has risen above 4.20.A sustained trade above 4.20 can take copper towards 4.40/50.

FOREX

Dollar Index has fallen but has support near current levels which if holds can produce a bounce back towards 93.30/40. Euro is down from 1.1750. View is bearish while below 1.1780-1.1750. Aussie and Pound have risen well but could soon face rejection and see a corrective decline. USDCNY is holding near immediate support at current levels and could bounce back to 6.49/50 again. USDINR can break below 74.20 to test 74. USDJPY remains ranged within 109-110.50.

Dollar Index (93.042) tested 92.94 before bouncing back from there slightly. There is support at current levels which if holds can take the index higher towards 93.30/40 again in the near term. Watch price action near current levels.

Euro (1.1736) has come off slightly from 1.1750 itself without attempting to move higher towards 1.1780. Could 1.1750 hold for now? In that case a fall back to 1.1730/1.1700 cannot be negated in the near term. While below 1.1780-1.1750, immediate view is bearish.

EURJPY (128.77) tested 129.14 but could not sustain the rise and instead fell back to levels below 129. A fall to 128.50-128.30 is possible before another bounce is seen. Overall broad range of 128-129.50 may hold for the near term.

Dollar-Yen (109.72) continues to hold within 110.50-109 zone. Unless a break on either side of the range is seen, there is lack of clarity on further direction. While above 109.50, a rise back to 110-110.50 looks possible within the mentioned range.

Aussie (0.7213) has risen as expected but we need to see if it manages to break above 0.7250 and sustain to move up further. While below 0.7250, view is to see a rejection that could take Aussie back towards 0.7150. Watch price action near 0.7250.

Pound (1.3714) has risen above 1.37 as expected but needs to sustain to break above 1.3750 to move further up. While below 1.3750, there is scope for a rejection that can take Pound back to 1.3650 soon. Watch price action to see if Pound manages to break above 1.3750. While below 1.3750, view continues to remain bearish for the medium term.

USDCNY (6.4816) has fallen to test 6.48/47 as mentioned yesterday. There is immediate trend support at current levels which may hold and produce a bounce back towards 6.49/50.

USDINR (74.2150) closed near 74.20 yesterday but fell sharply on the NDF markets. NDF rate quotes at 74.10 just now indicating a fall towards 74.10-74.00 is possible in the onshore markets today. We may expect an opening below 74.20 that could drag the pair to test 74 today. Thereafter, if it breaks below 74 or not will have to be seen.

INTEREST RATES

The US Treasury yields remain stable. We retain our view seeing a dip to test their crucial supports in the near-term while they trade below their immediate resistances. Thereafter it will have to be seen if they can bounce-back or not. The Fed Chairman’s speech at the Jackson Hole Symposium on Friday will be a key event to watch which could possibly set a direction for the yields. Until then, we can expect stable movement. The German yields are holding above their key supports and need to see if they can get a strong follow-through rise and a corrective rally. The 5Yr GoI can oscillate in a broad range of 5.62%-5.76% in the coming days.

The US 2Yr (0.23%), 5Yr (0.78%), (1.26%) and the 30Yr (1.88%) Treasury yields remain lower and stable. Our view remains the same. The 10Yr can test 1.18% while it remains below 1.3% and the 30Yr can dip to 1.8% while below 1.9%. Thereafter it will be important to see if the yields can bounce-back or not. Price action at 1.18% (10Yr) and 1.8% (30Yr) will need a close watch.

The German 2Yr (-0.76%) and 5Yr (-0.75%) yields remain stable while the 10Yr (-0.48%) and 30Yr (-0.03%) have inched up slightly. The key supports at -0.5% (10Yr) and -0.05% (30Yr) seems to be holding for now. It will have to be seen if the yields can see a strong follow-through rise from here and see a corrective rally before resuming the broader downtrend. It is a wait and watch situation now.

The 5Yr GOI (5.6896%) has come-off from the high of 5.71% yesterday. We retain our near-term bullish view of seeing a rise to 5.73%-5.74% and 5.76%. Broadly, we can look for a range of 5.63/62%-5.74/76%.