Market Morning Briefing: Aussie Has Immediate Support On Daily Candles Near 0.714

STOCKS

Dow (26154.67, +0.033%) is slowly inching up and could test 26500 on the upside. A break above 26500 thereafter would turn bullish on the medium term movement taking the index to higher levels of 27000.

Dax (12124.33, +0.57%) is headed towards 12300 in the near term from where another dip back towards 11900-11700 could be expected. Unless a sharp break above 12300 is seen, the index could trade within the broad 11700-12300 region.

Nikkei (23094.67, +1.20%) has broken above 23000 for the first time in the last few attempts made since May’18. If the index is able to sustain above 23000 this time, it could rally towards 24000 on the upside, testing previous high of Jan’18. While the index is above 23000, it looks bullish and could pull up Dollar-Yen in the near term.

Shanghai (2662.75, -0.70%) is currently trading below the immediate resistance at 2700. Movement in the past few sessions have been very narrow in the small range of 2650-2700 and the range could continue for the next 1-2 sessions before a sharp move on either side is seen. Note both 2650 and 2700 are important near term support and resistance levels.

Nifty (11515.20, +1.28%) saw a sharp gap up opening on Friday and closed above 11400. Now, while the rise sustains, the index could head higher towards 11600-11800 in the near to medium term.

COMMODITIES

Brent (78.08) now has support at 78 and while that holds, can move up towards important resistance near 80-81 before coming off from there. A fall below 78 could take it to lower support near 76.70.

WTI (68.96) has equal scope of moving up towards 70-71 or coming off to test 66 on the downside. Trading at the middle of this 66-71 range, WTI could spend some time whipsawing in the mentioned range. Weekly candles suggest bullishness for the medium term.

The Brent-WTI spread (9.31) has come off from 9.71 seen on Friday. While the spread comes off towards 8, Crude prices could see a decent dip in the near term.

Gold (1199.40, -0.14%) and Copper (2.6245) have again dipped after seeing some upward movement last week. Gold is likely to remain in the 1190-1210 region for now while Copper could trade in the 2.60-2.70 region. Although the two metals make attempts to move up, they are unable to sustain sharp rise at the moment. Some more of ranged sessions looks possible in the near term. If daily resistance on Gold near 1220 holds, it could come off towards 1190 or even lower in the near term.

FOREX

Watch out for crucial resistance @ 95.0-95.2 on Dollar Index, support @ 1.16 on Euro and support near 1.305 on Pound. Meanwhile USDINR looks oversold – but the RBI and the government should prevent another rise past 72.20-50.

Euro (1.1631) has immediate Support near 1.16 on daily candles. While above 1.16, the chances of a breach of resistance near 1.17 remain high – a breach could lead to 1.18 quickly.

Dollar Index (94.92) has resistance near 95.0-95.2, which is likely to push it down towards 94.5-94.0 in this week. A breach above 95.2 is less preferred currently.

Dollar Yen (111.99): After having breached resistance near 111.5 on 3 day candles last week, Dollar Yen is looking bullish towards resistance on weekly candles near 112.5.

Euro Yen (130.27) is trading below resistance on weekly candles near 131 but could find support near 130 (on daily line chart). In the near term, a rise beyond 1.17 and 112.17 on Euro and Dollar-Yen respectively (as forecasted above) would make Euro Yen breach the resistance near 131.

Pound (1.3079) is staying below the 21 weeks MA (1.3172) on weekly line chart. A break below 1.305 could again bring in some bearishness.

Aussie (0.7155) has immediate support on daily candles near 0.714, which if broken could again take it down towards 0.708-0.707 – long term support level on weekly line chart. A week close above 0.72 could establish 0.7085 (tested last week) as the bottom.

Dollar Rupee (71.85) Over to the RBI-Government team now. Need to ensure that the market does not rise past 72.20-50. Ideally push it below 71.60 by Day Close. BUT, they will be fighting against an Oversold market.

INTEREST RATES

Last week, the ECB had maintained status quo in its policy. But, Draghi’s optimism on the inflation trajectory has made the markets start expecting a rate hike in Sep 2019. Hence, inspite of the dovish policy and reduced growth forecasts, German bond yields are rising.

German 10 year yield (0.45%), as per expectation, has risen to 0.45%. If it rises further, then a rise towards 0.58% could also take place quickly.

US Retail Sales data on Friday showed only a moderate month-on-month rise of 0.1% but the July growth figures were revised upwards from 0.5% to 0.7%. This led to further bullishness in US yields.

Earlier, US CPI for August was below expectations with the month on month growth in Headline CPI being 0.2% instead of the expected 0.3%. On the trade war front: Trump might still go ahead with tariffs on $200 bn worth of Chinese imports (in spite of another round of trade talks with China slated to take place).

The Retail Sales data has managed to take the US 10 year yield (3%) to the 3% level once again. As we have been saying, this is a psychologically crucial barrier and the trade war induced risk aversion is likely to bring the yield back below 3% in the near term.

Note that we have also been saying that the previous high of 3.125% might have been the top for the US 10 year yield in 2018