Market Morning Briefing: Aussie Has Broken Above 0.77

STOCKS

Equities hold higher and are continuing to move up. While there is room to move further up from here, we prefer to remain cautious as key resistances are coming up and there is a strong likelihood of seeing a reversal going forward. Dow is heading up to 31500 and can face resistance at 31500-32000. DAX has resistances at 14200 and 14500-14700. Nikkei has room to test 30000 and Shanghai can move up to 3600-3635 again. Senex and Nifty are coming closer to their key levels of 51500-52000 and 14200 respectively.

Dow (31385.76, +237.52, +0.76%) has tested 31300 as expected and could head towards 31500 in line with our expectation. As mentioned yesterday, an extended rise to 32000 is a possibility before a sharp corrective fall begins. We retain our cautious stance.

DAX (14059.91, +3.19, +0.02%) has come-off from the high of 14169.49 yesterday. The first resistance at 14200 that we have been mentioning is holding well for now. A fall below 14000 will negate the chances of testing 14500 (the second resistance) and in turn can drag DAX lower to 13600 and 13400-200 from here itself.

Nikkei (29497.51, +109.01, +0.37%) has surged to test 29500 in line with our expectation. As mentioned yesterday, the upside can extend even up to 30000. We expect Nikkei to reverse lower from the 29500-30000 region.

Shanghai (3558.39, +25.94, +0.73%) has risen above 3550. While above 3550, a further rise to 3600-3635 can be seen in the coming days. The broader 3400-3635 range seems to be in play now. As we have been mentioning for some time, while above 3400, the long-term trend remains up.

Sensex (51348.77, +617.14, +1.22%) and Nifty (15115.80, +191.55, +1.28%) continues to surge and are coming closer to their crucial resistances. 51000-52000 on the Sensex and 15200 on Nifty are likely to be the cap on the upside from where we expect the indices to witness a corrective fall. The price action in the coming days will need a close watch.

COMMODITIES

Commodity prices gain upward momentum as the Dollar weakens yet again falling sharply from recent resistance levels. While the dollar trades weak, the commodities could gain bullish momentum taking the prices higher for the next few sessions at least. Crude prices could move up towards 65 while Gold and Silver may test 1880 and 28-29.50 respectively on the upside. Copper also looks bullish towards 3.70/80.

WTI (58.34) has broken above our expected 58 which is an important trend resistance on the weekly charts and while the pries trades higher, the bulls could take it towards 65 on the upside.
Brent (60.98) has also risen above 60 as expected and could be headed towards 65 too a break above which will eventually take it upto 70. Immediate view is bullish.

Gold (1841.10) has bounced well but needs to break above 1880 in order to target 1920-1940 on the upside. While below 1880, we may not negate a fall back towards 1800 or lower again.

Silver (27.57) has risen and could head higher to test 28-29.50 on the upside before again falling back from there. Immediate view is bullish.

Copper (3.6770) has broken above 3.65 and while the price continues to move up, an eventual test of 3.70/80 could be on the cards.

FOREX

Dollar Index trades lower while below resistance at 91.50 and has dragged down Dollar Yen down which could test 104.50-104 before bouncing back higher. Euro may test 1.21 on the upside while Pound and Aussie look bullish for the near term. USDCNY could test 6.42/40 on a break below 6.44 while USDINR could be ranged within the broad 72.75-73.10 region.

Dollar Index (90.734) has exactly held at our resistance at 91.50 and has been falling from there towards 90.50-90.00. It would be important to see price action near 90 to see if the index manages to bounce back from there or break lower to re-trigger a possible fall towards 89-88 in the longer run.

Euro (1.2079) has risen from 1.1950 levels and while it trades higher, it could test 1.21 on the upside. A break or fall from 1.21 would decide on the next course of movement.

EURJPY (126.74) may hold below 127.50-127.00 in the near term which could allow for a fall towards 126. Watch price action near current levels. On a break above 127.50, EURJPY could turn very bullish towards 128-129-130 in the medium term.

Dollar-Yen (104.92) has fallen well from 105.79 as weakness in Dollar Index has dragged the pair lower. We may expect support at 104.50-104.00 to hold in the near term to produce a bounce back in the near term.

Aussie (0.7728) has broken above 0.77 and could be headed towards 0.78—0.7820 in the near term. View is bullish for the near term as Copper heads towards 3.70/80.

Pound (1.3777) has risen well but needs to break above 1.38 in order to move up sharply towards 1.40 on the upside in the longer run. Watch price action near 1.38 in the near term.

USDCNY (6.4467) may hold above 6.44 to see another bounce back to 6.48/50 on the upside. But if the pair manages to break below 6.44, a re-test of crucial long term supports at 6.42/40 cannot be ruled out.

USDINR (72.96) ranged in the 72.75-73.00 region yesterday. Immediate upside could be capped at 73.05/10 on the upside but could have scope for a fall towards 72.80/75 again in the near term as Dollar weakness and strength in Euro and Chinese Yuan may be in favor of rupee today preventing USDINR to break above 73 on the upside. Watch price action within the ranged 73.05/10-72.80/75 region.

INTEREST RATES

The upmove in the US Treasury yields seem to lose momentum as they have come closer to their key resistances. A fall from here will indicate a turn-around and drag them lower going forward. The German yields remain higher and are keeping up the bullish view intact. The 10Yr GoI can consolidate sideways before resuming the uptrend.

The US 2Yr (0.11%) and 5Yr (0.48%) Treasury yields remain stable while the 10Yr (1.17%) and 30Yr (1.95%) have come-off slightly. A further fall from here will indicate a turn-around and the fall-back to 1% (10Yr) and 1.8% (30Yr) mentioned yesterday can happen from here itself without seeing an extended rise to 1.25% (10Yr) and 2.05% (30Yr). The price action in the next few sessions will need a close watch.

The German 2Yr (-0.72%), 5Yr (-0.69%), 10Yr (-0.45%) and 30Yr (0.01%) yields sustain higher and remain bullish. Our view of testing 0.40% (10Yr) and 0.05% (30Yr) on the upside remains intact. We reiterate that the 30Yr yield looks more bullish to target 0.15%-0.20% in the coming weeks. This could help the 10Yr to breach its immediate resistance at -0.40% and extend the upmove to -0.25%. We will have to wait and watch.

The 10Yr GoI (6.0870%, 05.77 GS 2030) fell yesterday. But the 6.06%-6.05% support zone continues to hold well. A sideways consolidation between 6.06/05% and 6.16/18% is possible for sometime before the expected rise to 6.25%-6.28% happens. The 05.85 GS 2030 (6.0398%) can move up to 6.05%-6.10% in the coming weeks.