Market Morning Briefing: Euro Has Fallen Sharply Breaking Below 1.14

STOCKS

Dow can dip to 35000 while below 36250 while Dax could be headed towards 16400 while above 16100.Nikkei and Shanghai can rise towards 30000/31000 and 3600 respectively if they continue to rise from current levels. Nifty and Sensex need to see if they can break and sustain above 18200 and 61000 to turn further bullish for the medium term.

Dow (36087.45, -12.86, -0.036%) has come down today. While below 36250, a fall towards 35000 is possible.

DAX (16148.64, +54.57, +0.34%) has broken the range of 15900-16100 on the upside. The view is now bullish to see a rise towards 16400 while the rise above 16100 sustains.

Nikkei (29841.26, +64.46, +0.22%) has risen further today. The view remains bullish to see a test a 30000/31000 before we see a corrective fall.

Shanghai (3542.94, +9.64, +0.28%) has risen again today and is trading just shy of 3550. A break above 3550 can trigger a rise towards 3600.

Nifty (18109.45, 6.70, +0.037%) opened higher initially before coming down to close at 18109.45 yesterday. The next couple of days are crucial to see if Nifty can rise past 18200 or a break below 18000 is seen.

Sensex (60718.71, +32.02, +0.053%) tested 61036.56 yesterady before closing below 610000. While above 60000, a test of 61000/62000 again is possible.

COMMODITIES

Commodity prices have almost risen globally except that of crude which is in a sideways range after rising sharply over the past few months. Gold, Copper and Silver now show some rally while Crude prices remain stable. Gold can test 1880-1900 while above 185, copper can trade within 4.45/50-4.30/25 while Silver is bullish while above 24.5. Brent and WTI have important resistances near 85 and 82/83 respectively which are likely to hold in the near term.

Brent (82.81) fell almost towards 80 before bouncing back from there. Resistance is seen near 84/85 on the upside which needs to hold to produce a sharp fall towards 79/78 on the downside. While below 85, view remains sideways to bearish for Brent.

WTI (81.47) has bounced from immediate support near 79 and while that holds, a bounce to 82-83 is possible before again resuming a fall that could break below 79 to fall lower towards 75.

Gold (1870.20) has moved up well. Immediate support is seen at 1850/60 and while that holds, Gold can rise towards 1880-1900 slowly. A broad sideways range of 1850-1880 can also be possible in the next few sessions before a further rise is seen. For now trade above 1850 looks likely.

Silver (25.27) has dipped from 25.50 and is trading slightly lower. While above immediate support at 24.50, there is scope for a rise to 26 or higher eventually. Important supports are seen at 24.50 and 24 below current levels.

Copper (4.4360) trades near the lower end of the 4.45/50-4.35 region and a break on the downside if seen can take it towards 4.30/25 before bouncing back towards 4.45/50 again in the medium term. Watch price action near current levels.

FOREX

Dollar Index may see a pull back to 94.50/25 on the downside before heading towards 95 while Euro has broken below 1.14 and while above immediate support at 1.1350, we may expect a possible rise to 1.1425 that may extend to 1.15 too. Overall downtrend is intact with a possible target of 1.12 in the medium term. Aussie looks bullish while Pound has scope to fall further in the near term. Crucial fall in USDCNY breaking below support at 6.3750. It can open up chances of a further fall to 6.36/35 if an immediate bounce back is not seen. Stronger Chinese Yuan may possibly keep USDINR low today.

Dollar Index (95.407) tested 95.60 yesterday, breaking above the immediate resistance near 95.27 mentioned yesterday. But before testing 96 a pull back seems to be on its way as the index has dipped from yesterday’s highs. A fall towards 94.50-94.25 can be possible before again resuming its uptrend.

Euro (1.1383) has fallen sharply breaking below 1.14. This is a crucial break but we may expect 1.13-1.1350 to hold for now and produce a bounce back to 1.1450-1.15 before falling further towards 1.12 in the medium term. Note that while Euro sustains below 1.13, chances of testing 1.12 cannot be negated in the longer run.

EURJPY (130.02) has been falling well too but can possibly see a corrective upmove from 129.50 towards 130.50-130.75 before resuming the fall.

Aussie (0.7362) has been rising from 0.7276 over the past 3-sessions and looks bullish for a further rise towards 0.7450-0.75 slowly. Immediate view is bullish with possible small interim corrections.

Pound (1.3434) has immediate resistance near 1.3450 which if holds can produce a fall towards 1.3350-1.330 in the near term.

Dollar-Yen (114.19) seems to be holding well below 114.70/50 for now. While the upside target of 115.50 is open, while below 114.75/50, we may expect a short corrective dip towards 113.25-113.00 before again moving up from there.

USDCNY (6.3706) has fallen sharply today breaking below our mentioned support near 6.3750. This opens up a further fall to 6.36/35 in the medium term.

USDINR (74.4875) traded within 74.30-74.50 region yesterday. Resistance at 74.60 seems to be holding well for now and while that holds, a fall to 74.28/25/20 looks possible on the downside. Below 74.30, support is seen at 74. View remains overall bearish towards 74 while below 74.60.

INTEREST RATES

The US Treasury yields have surged especially at the far-end and are coming closer to their key resistance. It is now important to see if the yields are reversing lower thereafter or not in line with our expectation. The German yields have also risen well and are coming closer to their key resistances. The corrective rise that is in place could be coming to an end soon and the broader downtrend is likely to resume. The 10Yr and 5Yr GoI have reversed lower without seeing an extended rise that was expected. They can now move down towards the lower end of their current range from here. Broadly, the bias is bearish to see a downside break of their ranges.

The US 2Yr (0.51%), 5Yr (1.24%), 10Yr (1.61%) and the 30Yr (2%) have surged especially at the far-end. The 10Yr and 30Yr are heading up towards 1.65% and the 30Yr has touched 2% and can extend the upside to 2.1% in line with our expectation. While we expect a reversal thereafter, the price action around 1.65% (10Yr) and 2.1% (30Yr) will need a close watch to see if the yields are turning down or not.

The German 2Yr (-0.70%), 5Yr (-0.53%), 10Yr (-0.23%) and 30Yr (0.08%) yields have risen across tenors. The 10Yr is coming closer to -0.2% and need to see if it can extend the rise to -0.1%. The 30Yr on the other hand is just below 0.1%. It has to be seen if the expected reversal is happening from here itself or after an extended rise to 0.2%.

The resistance at 6.38% on the India 10Yr GoI (6.3430%) has held well and the yield has reversed lower. A further dip to 6.3% can be seen in the coming sessions. The broader 6.3%-6.45% range remains intact, and our bias is bearish to see a downside breakout of this range eventually.

The 5Yr GoI (5.6895%) has dipped below 5.7% contrary to our expectation to see a rise to 5.75%-5.76% and then reverse lower. The fall to 5.66% can now happen from here itself. A break below 5.66% will pave way for a deeper fall to 5.62%-5.60%.