Market Morning Briefing: USDCNY Has Fallen And Could Test 6.95

STOCKS

Asian indices show some sort of relief on early trades today. It will have to be seen if they can sustain this bounce and see further rise this week. Dow has bounced from the day’s low on Friday and has an important support coming up at 24350 which will need a close watch this week. DAX is under pressure and has room to fall further before seeing a bounce-back. Nifty and Sensex, though have some room to fall, are also coming closer to their crucial supports which we expect to hold and trigger a reversal.

Contrary to our expectation Dow (25409.36, −357.28, -1.39%) has recovered slightly from the low of 24681 on Friday. 24350 is a crucial support to watch this week which is likely to hold. While above this support, a corrective bounce to 26000-27000 can be seen in the short-term.

DAX (11890.35, −477.11, -3.86%) has declined breaking below the crucial 12100-12000 support zone. The outlook continues to remain bearish. 12100-12200 will now be a good resistance. While below 12200, a further fall to 11500 and even 11000 cannot be ruled out in the coming weeks before we see a strong bounce-back.

Nikkei (21377.87, +234.91, +1.11%) has bounced-back well from a key support level of 20800 today. While this bounce sustains, a short-covering rally to 22400-22500 is possible this week. Nikkei will come under more pressure only of a strong break below 20800 now.

Shanghai (2955.15, +74.85, +2.60%) fell towards 2875 on Friday as expected but has bounce-back well above 2900 again today. This bounce has to sustain and take the Shanghai above 3000 again to bring back the possibilities of testing 3100-3150 on the upside again. While below 3000, the index is likely to remain vulnerable to test 2850-2800 on the downside in the coming weeks.

Sensex (38297.29, -1448.37, -3.64%) has come-down well below 39000 and can now test 38000 and even 37500-37300 which are the next crucial supports to watch now. We expect this support zone to hold and a short-covering rally to 38200-38500 is possible thereafter.

Similarly, Nifty (11201.75, -431.55, -3.56%) has strong and cluster of supports in the broad 11200-11000 region which might the potential to halt the current fall. A bounce from this support zone can take the Nifty higher to 11500-11600 levels again.

COMMODITIES

Surprising fall in Gold and Silver was seen on Friday amidst the sell offs seen in most equities across the globe. But while above immediate and crucial supports both Gold and Silver may recover a bit in the coming sessions. Supports on Crude prices hold well for now and could lead to some upmove in the near term. Copper looks bullish too with a possible double bottom formation that would need further price confirmation.

Brent (51.38) and Nymex WTI (46.20) are recovering a bit after seeing recent lows on Friday. Brent bounced back from levels below 49 seen on Friday failing to sustain below crucial support at 50. Now while Brent trades above 50, we may expect some upmove towards 55-57 in the medium term. Similarly, WTI held above 44 and could target 48-50 again in the medium term.

Gold (1597.90) almost tested 1560 on Friday before closing slightly higher and continues to trade at higher levels just now. Gold could attempt to test 1640 again in the near term while downside could be limited to 1560-1540 levels in the near term. Note that both 1540 and 1560 are crucial support levels and any break below 1540 could trigger bearishness for the near to medium term.

Silver (16.87) also plunged surprisingly. It is expected to see a corrective bounce in the next few sessions but would have some scope of testing lower support near 15.70-16.00 in the near term. While above 15.70, Silver could again start to pick up upside momentum.

Copper (2.5710) is likely to form a double bottom near 2.50 and while that holds, a rise back towards 2.6250-2.65 looks possible in the near term.

FOREX

Dollar Index weakens below 98 and could continue to fall some more in the near term. Dollar Yen looks weak while Euro may rise towards resistance near 1.11. Aussie and Pound could be bearish in the near term. Yuan looks strong and has to be seen if it is able to bring in some strength into the Rupee as well.

Dollar Index (97.92) has fallen sharply below 98 and as mentioned on Friday the index could head towards 97 in the near term possibly helping majors to strengthen a bit.

Euro (1.1055) has moved up and while the dollar Index targets 97, Euro has room to rise towards 1.11 in the coming sessions. View is bullish while above 1.1000-1.1050.

Dollar-Yen (108.18) has surprisingly fallen breaking below our expected support at 108.75. Our bullish view of re-attempting a rise towards 110 or higher could be negated just now and we may look for 108 to hold as immediate support in the near term. Break below 108, if seen would turn near term bearish for Dollar-Yen. Watch price action near 108 just now.

EURJPY (119.64) tested 118.38 before bouncing back from there. While above 118, the cross pair could attempt to rise back towards 121-122 in the near term. But we would be cautious of a possible break below 118 in the medium term.

Aussie (0.6536) is looking fairly bearish for the near term while below 0.66. A further fall towards 0.63/62 cannot be negated while below 0.66.

Pound (1.2824) is likely to test initial target of 1.28 in the near term. A break below 1.28 is needed to confirm further bearishness in the longer run; else we may expect Pound to bounce back from 1.28.

USDCNY (6.9646) has fallen and could test 6.95. Near term could see some more fall.

USDINR (72.1850) closed sharply above 72 on Friday but it has to be seen if the stronger Euro, a stronger Yuan and weaker Dollar can bring in some strength into the Rupee as well. A dip towards 72-71.90 could be possible but at the same time we would watch resistance near 72.25/30.

INTEREST RATES

The US Treasury yields have tumbled further breaking below their crucial supports that we had expected to hold and produce a bounce. The outlook continues to remain bearish and the Treasury yields have room to fall further. The German Yields have come down further in line with our expectation and keep our bearish view intact. The 10Yr GoI can move up to test 6.43%-6.45% while it continues to sustain above 6.35%.

Contrary to our expectation the US 2Yr (0.79%), 5Yr (0.94%), 10Yr (1.07%) and 30Yr (1.62%) Treasury yields have declined sharply breaking below their crucial supports that we had expected to hold. The 2Yr has tumbled below 1% and is now vulnerable to test 0.60% and 0.50% this week while it remains below 1%. The 10Yr has declined below 1.25 and can now test 1%. Inability to bounce from1% can drag the 10Yr further lower to 0.75% or even lower. The 30Yr has another important support coming up at 1.50% which will need a close watch this week.

The German 2Yr (-0.78%), 5Yr (-0.77%), 10Yr (-0.61%) and 30Yr (-0.16%) yields have come down further in line with our expectation. The 30Yr has extended the fall beyond -0.10% as expected and is coming closer to -0.20% now. The outlook remains bearish and the 30Yr can test -0.30% and -0.35% on the downside. The 10Yr has an immediate support at current levels and a short-lived bounce to -0.50% cannot be ruled out. However, the bigger picture remains bearish for the 10Yr to test -0.80 and -0.83% in the coming weeks.

The 10YR GOI (6.3714%) sustained above 6.35% and tested 6.40% on Friday as expected. While above 6.35%, a further rise to 6.43% and even 6.45% looks likely in the near-term. A break below 6.35% is now needed to bring back the chances of seeing 6.30% and 6.28% on the downside immediately.