Market Morning Briefing: USDCNY Broke Below 6.44

STOCKS

Dow trades at an important juncture and needs to either sustain above 34750-35000 in order to rise to 35250+ else a fall to 33750 will hold in the coming weeks. Dax on the other hand needs to sustain above 15200 to rise further from here. Nikkei and Shanghai trade higher today and can move up towards 29000/29500 and 3700 respectively if the rise sustains. Nifty can rise to 18000-18250 while above 17800. Sensex can also target 61000 while above 60000.

Dow (34746.25, -8.69, -0.025%) has risen to trade near crucial resistance at 34750-35000. If Dow manages to break above 35000, we can expect a rise to 35250 and higher eventually, else any rejection from 34750-35000 region can bring it down towards 33750 again.

DAX (15206.13, -44.73, -0.29%) needs to hold above 15200 in order to move up towards 15500 or higher. Any break below 15200 can again drag it down to 14900/800. Watch price action near current levels.

Nikkei (28488.95, +440.01, +1.57%) has surged today. A rise towards 29000\29500 is possible on the upside soon.

Shanghai (3606.28, +14.11, +0.39%) is hovering near the level of 3600.A sustained break above 3600 is needed to see a of 3700. Else the index can decline back towards 3550. Watch price action near 3600.

Nifty (17895.20, +104.85, +0.59%) tested 17941 before falling from there. Having broken the 17600-17800 range, the Nifty could now target a rise towards 18000-18250 and continue the longer term upmove.

Sensex (60059.06, +381.23, +0.64%) closed above 60000 on Friday opening up chances of a further rise towards 61000-62000 in the coming weeks.

COMMODITIES

Crude prices continue to surge and may test immediate resistance levels overhead. Very near term view is to see stronger crude for now. Gold ad Silver are stable and stuck near current levels. Unless some volatility creeps in, it is difficult to say which way it would move. Copper has immediate resistance near 4.30/35 and while that holds, a fall back to 4.20 looks possible.

Brent (83.49) and WTI (80.77) continue to rise sharply. But we would caution on longs just now as we see immediate resistance near 84-85 region just above current levels on Brent and near 81-82 on WTI. The resistances may hold to produce a fall in the near term. Watch price action near the mentioned resistance region just above current levels.

Gold (1759.40) and Silver (22.77) remain stuck and are stable at current levels. Unless there is any volatility in the prices, we continue to hold ranged view of 1740-1780 and 21.50-23 respectively.

Copper (4.2845) has immediate resistance at 4.30 and higher at 4.35 which may hold and produce a fall towards 4.20/15. Watch for a fall from immediate resistances overhead.

FOREX

Dollar Index fell below 94 but could not sustain and has bounced back well. While above 94, there is scope to test 95 on the upside. Euro trades below 1.1650/1.1600 and while these levels hold, view is bearish towards 1.1525-1.1500. USDJPY has risen well breaking above 112.50 and if the rise sustains, we may expect an eventual rise towards 114 in the coming weeks. EURJPY has been pulled by a weaker Yen and needs to break above 130.50/75 in order to move up further towards 131-132 else a fall back to 129-128 is possible. Watch price action near 130.50/75. USDCNY has broken below 6.44 and while that holds, a fall to 6.42/41 cannot be negated. On the USDINR, we need to see if the RBI holds the pair below 75.20 to prevent any further Rupee weakness. A range of 74.60-75.20/25 may hold for now.

Dollar Index (94.11) fell to 93.93 post the payrolls data on Friday but the index has bounced back again above 94.There is a fair possibility of rising towards 95 while above 94 else the index has to fall below 94 and sustain in order to bring in a lower possible target of 93. Wait and watch price action to see if the index sustains trade above 94 or falls lower.

Euro (1.1571) has immediate resistance at 1.16 and higher at 1.1625/50 which if holds in the near term can produce an eventual fall towards 1.1525-1.1500. View is bearish while below 1.1650/25 towards 1.1525/00.

EURJPY (130.19) has risen well, pulled up by the rise in USDJPY. We need to see if the cross can manage to rise above 130.50/75 in order to target fresh upper levels of 131-132 in the medium term. Else we may expect rejection from 130.75/50 back towards 129-128. Watch price action closely near 130.50/75.

Dollar-Yen (112.54) has broken above immediate resistance at 112.50 and while the rise sustains, we may expect a target of 114 on the upside in the coming 1-2 weeks.

Aussie (0.7327) is slowly rising and can test 0.7350 on the upside. A break above that is needed to take Aussie up towards 0.74-0.7450 in the near term else any rejection from 0.7350 can again drag it lower towards 0.72. Watch price action near 0.7350.

Pound (1.3640) has enough room on the upside to rise on a break above 1.3650-1.37 but while it finds difficult to rise above 1.3650-1.37, we may expect a ranged movement within 1.3650/37-1.3550 for the near term. A break above 1.37 can trigger a sharp rise towards 1.38-1.3850 in the coming 1-2 weeks.

USDCNY (6.4366) broke below 6.44, breaking the 6.44-6.47/48 range on the downside. While below 6.44, the pair can fall to test 6.41 in the near term. Immediate view is bearish while below 6.44.

USDINR (74.99) came off from 75.1575 on Friday as the central bank seems to have sold dollars near 75.10/12. We need to see if the RBI can keep the pair below 75.20 today also and dear the spot lower. In absence of RBI, there is scope for a rise to 75.3250 initially and then towards 75.50. Else while below 75.20, we can see a fall to 74.80/60 on the downside. Note that 74.60 is an important support.

INTEREST RATES

The US Treasury Yields have risen and are coming closer to their crucial resistance. A strong and sustained rise past the immediate resistances (1.65% on the 10Yr and 2.2% on the 30Yr) will pave way for a further rise and negate our view of seeing a reversal. The German yields continue to move up and are poised just below their crucial long-term resistances. We expect the resistances to hold and see a reversal in the coming days. The 10Yr GoI has risen sharply after the RBI policy meeting on Friday but has a key resistance ahead from where we expect it to turn lower in the coming days. The 5Yr GoI looks mixed and can be range bound in the near-term.

The US 2Yr (0.32%), 5Yr (1.06%), 10Yr (1.61%) and the 30Yr (2.16%) %) have risen further. The 10Yr has just crossed above 1.6%. A sustained rise past 1.65% will open doors for 1.75% and then 2% over the medium-term. The 30Yr has resistance at 2.2% which if broken will pave way for a rise to 2.4%. A break above 1.65% (10Yr) and 2.2% (30Yr) will negate our view of seeing a reversal in the Treasury yields that we have been expecting.

The German 2Yr (-0.70), 5Yr (-0.54%), 10Yr (-0.15%) and 30Yr (0.33%) yields continue to move up in line with our expectation. The 10Yr and the 30Yr are heading up towards -0.1% and 0.35% respectively. The levels of -0.1% (10Yr) and 0.35% (30Yr) are important long-term resistance which we expect to hold. A fresh fall is likely from there.

The Indian 10Yr GoI (6.3133%) surged on Friday but has key resistance coming up at 6.35%. We expect the 10Yr to reverse lower from 6.35% (revised up from 6.32% mentioned on Friday) and see a fresh fall to 6.26%-6.25% initially and then to 6.2% and lower eventually in the coming weeks.

The 5Yr GoI (5.7039%) tested 5.76% as expected and has come-off sharply from there. Immediate outlook is mixed. 5.66%-5.76% can be the range of trade. A strong break below 5.66% is needed to turn bearish and negate a break above 5.76% and a rise to 5.8% going forward.