Market Morning Briefing: Aussie Has Fallen Too And Can Test 0.72

STOCKS

There seems to be short selling on the equities ahead of the FOMC due this week. Need to be careful on the equities breaking below immediate supports. Dow and Dax have crucial support near 34500 and 15400 which needs to hold to prevent strong bearishness. Nikkei and Shanghai have bounced from respective supports but need to see if that holds for the near term. Indian equities too have supports coming up which need to hold to prevent fresh fall.

Dow (34584.88, -166.44, -0.48%) has been stuck within 35000-34500 over the past few sessions and can slowly move up while 34500 holds as decent support for the near term. A break on the downside can take the index towards 34000.

DAX (15490.17, -161.58, -1.03%) has fallen sharply but has support near 15400 which needs to hold to bring the index up soon. Any break below 15400 would be strongly bearish. Watch price action near 15400 closely.

Nikkei (30500.05, +176.71, +0.58%) has risen back to 30500.The view is to see a test of 30500/750,while above 30,500.if the index breaks below 30500 then a dip towards 30,000 is possible in the coming days.

Shanghai (3613.97, +6.87, +0.19%) has held support at 3570 and bounced from there. While the support holds, the index has scope to rise towards 3625-3650 soon.

Nifty (17585.15, -0.25%) can come down to 17400/200 before a bounce is seen in the medium term.

Sensex (59015.89) has come down sharply after testing the high of 59737.32 levels. The view is bearish to see a corrective fall towards 58500 before we see a resumption in the uptrend in the medium term.

COMMODITIES

Markets seem to be selling into the FOMC this week. All commodities trade in the red but has important supports coming up which need to hold for reversals to be seen either by end of this week or in the coming week. Copper has broken below initial support at 4.20 but has crucial lower supports at 4.10-4.00. Silver and Gold have supports near 22-21 and 1725-1700. Brent and WTI have immediate supports near 74 and 71-70 respectively.

Brent (74.80) has dipped a bit, trying to come down since the last 3-sessions but has support at 74 which if holds can keep a range of 74-76/77 for a few sessions.

WTI (71.21) has also come down and could test immediate support near 71-70 which if holds can keep the price within 70-73 for a while.

Gold (1746.20) has fallen sharply over the last week and may continue to trade below 1800 for the early sessions this week. Decent support is visible near current levels but if the price fails to hold and move up from here immediately, we may see a further fall towards 1725-1700 in the near term.

Silver (22.12) is also down and headed towards support at 22-21 which may hold to produce a bounce back towards 24; else the decline may extend towards 20 on the downside. Watch price action near immediate support levels.

Copper (4.1795) has surprised by breaking below our expected support at 4.20. While the price continues to trade lower, we may have to allow for a further fall towards 4.10-4.00 before a bounce is seen from there in the medium term.

FOREX

Sharp rise in the Dollar Index ahead of the FOMC this week. Most currencies have broken immediate supports and trade weak over the past few sessions. There is lack of directional clarity just now but we may expect volatility through this week before getting more clarity on the market direction. We would be careful and keep a close watch on movement this week. Dollar Index has broken above 93.25 and could be headed towards 93.70/75 while Euro can fall towards 1.17-1.16. USDCNY is to test important resistance near 6.48. USDINR may rise towards 73.80-74.00.

Dollar Index (93.33) has broken above 93.25 and looks strong towards 93.70/75 in the near term. Thereafter whether it will hold below 74 or break on the upside is to be seen. Some clarity is possible after the FOMC meeting this week.

Euro (1.1712) has fallen sharply and could be headed towards 1.17-1.16 in the near term. Within the range, decent support is seen near 1.1660-1.1650 levels which might hold to give a short corrective rise. For now view is not very clear.

EURJPY (128.78) has dipped and can test support near 128 in the near term. Whether it will bounce from there or extend its fall further is to be seen.

Dollar-Yen (109.90) rose from 109.11 over the last 3-4 sessions but has not been able to break above 110-110.20. We continue to look for a trade range of 110.50/20-109.25/00 for the near term.

Aussie (0.7235) has fallen too and can test 0.72. If that breaks, we may expect a bounce else the downtrend may continue towards 0.7100. Watch price action near 0.72.

Pound (1.3712) has fallen sharply and could test 1.37 just now which if fails to produce a bounce, can open up chances of a fall to 1.3650-1.36 in the medium term. Watch price action near 1.37 over the very near term.

USDCNY (6.4655) has risen sharply over the last 2-sessions from 6.43 to current levels. It will now have to be seen if resistance near 6.48 holds or breaks. Watch price action near 6.48.

USDINR (73.48) held below 73.60 last week but the pair has moved up sharply on the NDF market which now quotes at 73.81/82 indicating a possible sharp gap up opening on the OTC market today. In that case, a rise to 74 could be on the cards before facing rejection from there. This brings back the 73.60/80-74.00 range for the near term.

INTEREST RATES

The US Treasury yields have been moving up ahead of the US Federal Reserve meeting on Wednesday. Key resistances are ahead and it will have to be seen if the Fed will provide a fresh trigger to break these resistances or not. We have to wait and watch. The German yields are at their key resistances which if broken can see an extended rise and delay the expected reversal. The 5Yr and 10Yr GoI can remain in the 5.6%-5.64% and 6.15%-6.2% range respectively in the near-term. The bias is bearish to break these ranges on the downside.

The US 2Yr (0.22%), 5Yr (0.86%), 10Yr (1.36%) and the 30Yr (1.90%) Treasury yields have moved up further on Friday. As mentioned Friday, the 10Yr can test the key resistance at 1.4% but the chances of the rise extending to 1.45%-1.5% will have to be seen. The 30Yr can rise to 2% on a sustained move above 1.9%.

The German 2Yr (-0.71), 5Yr (-0.61%), 10Yr (-0.28%) and 30Yr (0.21%) yields sustain higher. The 10Yr has come closer to -0.25% and has chances to extend the upside to -0.2%. The 30Yr is at a crucial resistance and a further rise from here can take it up to 0.35%. In that case the reversal that we have been expecting from -0.25% (10Yr) and 0.2% (30Yr) will get delayed.

The Indian 10Yr GoI (6.1672%)and the 5Yr GoI (5.6157%) can consolidate sideways in the near-term. The 10Yr can trade in the range of 6.15%-6.20% and 5Yr in the 5.60%-5.64% range. The broader bias is bearish to see a downside breakout of these ranges and a fall to 6.1%-6% (10Yr) and 5.55%-5.5% (5Yr) eventually.