Market Morning Briefing: Dollar-Yen Has Not Been Able To Rise Above 109.40

STOCKS

The rise after the US Fed meeting has not sustained. The global equities have failed to get a strong follow-through buying thereafter. This keeps our broader cautious view of seeing a sharp correction in the equities with limited upside from here. 33100 on the Dow is holding. DAX has resistance at 14900-15000. Nikkei and Shanghai have come-off below 30000 and 3450 again indicating lack of momentum to move up further. Sensex and Nifty did not even take part in the rise yesterday and continued to fall. They are under pressure to fall further in line with our expectations.

Dow (32862.30, −153.07, -0.46%) failed to sustain the break above 33100 and has closed below 33000. While 33100 holds, we expect a corrective fall to 32000-31000 initially and even deeper eventually in the coming weeks. A break below 32650 can trigger this fall. As mentioned yesterday, a strong follow-through buying above 33100 is needed to be bullish for a further rise to 34000 and negate our view of seeing a corrective fall to 32000-31000.

As expected DAX (14775.52, +178.91, +1.23%) has risen past 14600 and is heading towards 14900-15000. We reiterate that 14900-15000 is a strong resistance that can cap the upside. A corrective fall to 14000-13800 is possible from there. A sustained break above 15000 is needed to negate the above mentioned fall.

Nikkei (29954.80, −261.95, -0.87%) has failed to sustain the break above 30000 and has come lower again. Inability to rise above 30000 will negate the chances of a rise to 32000 mentioned yesterday. A fall below 29000 from here will bring back the earlier bearish view of seeing 27000 on the downside.

Shanghai (3432.82, −30.25, -0.87%) has come below 3450 again. Our view remains the same. 3500 is a key level to watch. A strong rise past 3500 is needed to negate the danger of seeing a fall to 3250-3200. While below 3500 the outlook is bearish.

Nifty (14557.85, −163.45, -1.11%) has broken its 14600-15400 range on the downside as expected. 14450 is the next crucial level to watch. A strong break below it will pave way for a fall to 14200-14000 that we have been mentioning for some time. The downside can extend up to 13800 eventually.

Sensex (49216.52, −585.10, -1.17%) is at the lower end of its 49000-52000 range. It can break this range on the downside and test 48500 initially. A further break below 48500 will then pave way for the fall to 48000-47000 that we have been mentioning.

COMMODITIES

Rising cases of Covid in Europe and halting of the Astrazenca vaccines due to possible side effects lead to fall in oil prices. Adding to this is the Dollar strength after the FOMC policy meet and rise in US weekly crude inventory by 2.4mln barrels for week ended 12th March as compared to a week earlier. Crude prices may continue to fall for the near term before any reversal is seen again. Gold and Silver may remain ranged within 1700-1750 and 25-26.30 respectively for now while Copper needs to hold above 4 to keep the bullish possibility intact.

Brent (63.54) and WTI (60.26) have fallen as expected breaking below our mentioned 65 and 61 on the Brent and WTI respectively. WTI has immediate support at 60 on the 3day candles which if breaks could open up chances of a fall to 55 eventually. Brent on the other hand does not seem to have any immediate supports below current levels and could fall towards 58-55 on a break below 60. Immediate view is bearish until we see a fresh reversal again.

Gold (1728.70) has dipped well and could not sustain a rise above 1750. We would look for a re-attempt of 1760/80 over the near term if Dollar weakens again over the next few sessions.

Silver (25.99) has dipped too and has scope for a test of 25 while below 26.30. Broad range of 26.30-25 may hold for the near term.

Copper (4.0805) has dipped but needs to sustain above 4 in order to move up towards 4.20/30. Else a fall to 3.80 could be on the cards before the expected rise is seen. Watch price action near 4.00.

FOREX

Fresh rise in Dollar Index within the 91-92 range has brought in weakness in other currencies. Euro is also stuck in the 1.19-1.20 range while EURJPY could hold below immediate resistance near 131 on the 3-day candles. Pound and Aussie looks ranged for the near term and have some scope of falling lower, breaking below immediate supports near 1.38 and 0.77. USDCNY has risen well and could head towards 6.55 while USDINR may hold above 72.40 and attempt a rise to 72.60/80 over the next 2-3 sessions.

Dollar Index (91.49) rose sharply from levels near 91.30 to 91.95. Immediate range of 91-92 needs to break on either side for the index to move sharply and throw some clarity on further direction from here. While our preference is to see a break below 91, the range of 91-92 seems to hold strong for now.

Euro (1.1907) has fallen back from 1.20 and if finding it difficult to break above 1.20 just now. While 1.20 holds, the chances of a sideways trade between 1.19-1.20 looks more likely.

EURJPY (129.83) is unable to rise above the resistance at 131 on the 3-day candles and while that holds the cross could remain within 128.50-131 region for a few sessions. A test of 135 can be possible only if 131 break successively on the upside. Look for a range of 131-128.50 for the near term.

Dollar-Yen (108.98) has not been able to rise above 109.40 and has come off from there well. We may expect immediate range of 108.50-109.50 to hold for now with possibility of an eventual break on the downside towards 107 or even lower.

Aussie (0.7735) fell from 0.7850 and could now test 0.77 on the downside. While immediate support at 0.77-0.7750 holds, we may expect a bounce back to higher levels soon. Watch price action near 0.77, a break below which (if seen) would drag the currency down to 0.76.

Pound (1.3913) is stuck in the 1.3950-1.40/41 region and could remain so for a few sessions. Unless a break on either side is seen it would be difficult to get clarity on further direction from here.

USDCNY (6.5142) has risen as expected and while the pair sustains above 6.50, we may expect an eventual rise towards 6.55 and higher. View is bullish while above 6.48/50.

USDINR (72.4413) tested a low of 72.43 yesterday but failed to break below 72.40 indicating that the support at 72.40 may hold for the near term producing a bounce towards 72.60/80 over the next 2-3 sessions. Watch for a bounce today while support at 72.40 holds. Only a break below 72.40 would we allow for a further dip to 72.20/10.

INTEREST RATES

The surge in US Treasury yields continues. There is room for further rise but key long-term resistances are coming up that can halt the rally and trigger a reversal. 1.8% and 2.2% are the crucial resistances to watch on the US 10 Yr from where we will be looking for a reversal. The German yields have moved up further and are keeping the bullish view intact. The 10Yr GoI has risen back into the 6.18%-6.26% range and can consolidate sideways for some more time. The bias is bearish to see a downside break of this range eventually.

The US 2Yr (0.16%), 5Yr (0.86%), 10Yr (1.71%) and 30Yr (2.46%) Treasury yields have surged across tenors. The 10Yr has an important resistance at 1.8% which will need a close watch. A break above it can see an extended rise to 2.1%-2.2% in the coming weeks. However, we see the yields coming closer to the top. 1.8% and 2.1%-2.2% are crucial long-term resistances that can cap the upside. We expect the 10Yr to reverse lower either from 1.8% itself or from 2.1%-2.2%. The 30Yr has an immediate resistance at 2.5% and then at 2.7%-2.9%.

The German 2Yr (-0.69%) and 5Yr (-0.62%) yields continue to remain stable while at the far-end the 10Yr (-0.27%) and 30Yr (0.30%) have moved up further. The bullish view of seeing -0.20%/-0.15% (10Yr) and 0.35% (30Yr) on the upside remains intact. As mentioned yesterday, thereafter the yields can reverse lower.

The 10Yr GoI (6.2023%) sustained above 6.18% and surged to an intraday high of 6.2376% yesterday. The 6.18%-6.26% range continues to remain intact. The upside is likely to be capped at 6.28%-6.30% if a break above 6.26% is seen. Our broader view remains bearish to see a downside break below 6.18% and a fall to 6.14%-6.10% if not immediately but eventually.