Market Morning Briefing: Aussie Has Risen Well Breaking Above 0.78

STOCKS

Equities continue to trade strong. Dow was closed yesterday but the Dow futures is trading higher indicating a possible rise when the US markets reopens today. DAX holds above 14000 and can move up to 14500-14600 on a break above 14200. Nikkei, Sensex and Nifty have risen past their key resistances contrary to our expectation to reverse lower from there. They can move further up in the coming days. Shanghai remains closed till Wednesday on account of public holidays. Overall the equities can move up further and the corrective fall that we have been expecting seems to be not happening immediately for now.

Dow (31458.40) was closed yesterday. The Dow Futures (31647, +250, +0.80%) is trading higher. While these gains in the Futures sustain, it can help the Dow to break 31500 and move up towards 32000 in the near-term that we have been expecting. However, we will continue to remain cautious and will be looking for a corrective fall from 32000 towards 31000-2-30000 or even lower.

DAX (14109.48, +59.59, +0.42%) sustains above 14000. It will have to be seen if it can breach 14200 and see an extended rise to 14500-14600 from here and then see a turn around. As mentioned yesterday 13800 is a key support. A break below it can trigger the corrective fall to 13600 and 13400-13200. Inability to breach 14200 can keep the chances high of seeing the above mentioned fall from here itself without seeing 14500-14600 on the upside.

Nikkei (30557.46, +473.31, +1.57%) has surged breaking above 30000 and indeed 30500 as well. The corrective fall to 29000-28000 that we have been expecting is not happening. While above 30000, a further rise to 33000-34000 is possible in the coming days.

Shanghai (3655.09) is closed till Wednesday on account of the Chinese New Year holidays. The Chinese markets will re-open on Thursday (18-Feb-21).

Sensex (52154.13, +609.83, +1.18%) and Nifty (15314.70, +151.40, +1%) have risen past 52000 and 15250 respectively. While this break sustains, a further rise to 53000 (Sensex) ad 15400-15600 (Nifty) can be seen in the comng days. The corrective fall to 50000-49000 (Sensex) and 14800-14600 (Nifty) that we were expecting stands negated now.

COMMODITIES

Crude prices look stable but have resistances above current levels which if hold could produce a rejection soon. Copper continues to move up and could test 3.90 on the upside. Gold looks sideways to bearish while below 1840 while Silver looks bullish towards 29.50 while above 26. Overall except Gold, immediate view for commodities are pointed to the upside.

Brent (63.55) looks stable near levels seen yesterday while WTI (60.21) has dipped slightly. Note immediate resistances near 65 on Brent and 63-63.50 on WTI that may hold for the near term. While we expect 65 to hold on Brent and produce a decline, a break above 65, if seen in the near term could open up chances of testing higher levels of 68-70 before a sharp decline is seen in the longer run. For now watch out 65 on Brent and 63.50 on WTI.

Gold (1824.80) trades slightly lower today and while below 1840, view is sideways to bearish towards a fall to 1780 gradually before attempting a rise back towards 1880-1900 in the longer run. Immediate view is bearish while below 1840.

Silver (27.90) has risen a bit today and has scope to rise towards 29-29.50 while above 26. As mentioned yesterday, 26 is an immediate support which if holds could keep the overall trend up for Silver.

Copper (3.8360) continues to rally and could test 3.90 before facing a short corrective dip from there.

FOREX

Dollar Index is falling within the 91-90 range and needs to break lower to indicate further bearishness. Till then we may expect the range to hold for some more time. Euro has scope to test 1.22 on the upside but for a further rise, we need to see Dollar Index breaking below 90. EURJPY may rise towards 129-130 in the medium term. Aussie and Pound look bullish too for the near term. USDJPY may test 106 before falling from there while USDINR has support at 72.50 which can be tested soon before a bounce back towards 72.80/85 is seen again.

Dollar Index (90.254) has dipped further and could move down to test 90 on the downside. Unless 90 breaks, it would be difficult for the index to resume its fall further and may continue to hold within 90-91 region. Watch price action near 90 to see if it breaks lower.

Euro (1.2143) has risen from as support near 1.21 mentioned yesterday is holding for now. A test of 1.22 is on the cards in the next couple of sessions. Immediate view is bullish.

EURJPY (128.21) has risen well and could be headed towards 130 from where a rejection looks possible back towards 126-125 in the coming weeks. We may not look for an immediate break above 130 within the current rally.

Dollar-Yen (105.53) has risen sharply and may test 106 on the upside before falling off from there back towards 104 or lower in the next couple of weeks. Immediate view is bullish towards 106 in the very near term.

Aussie (0.7804) has risen well breaking above 0.78. Now if the rise sustains, we may look for a possible test of 0.7845-0.79 on the upside. Immediate view is bullish.

Pound (1.3947) is headed towards 1.40 as expected and a break on the upside is seen would take it higher towards 1.41-1.45 soon. Watch price action near 1.40 in the next few sessions.

USDINR (72.69) tested 72.57 before bouncing back yesterday to close at 72.69. Note that there is scope for a test of 72.50 before a rise back to 72.80/85 is again seen in the near term.

INTEREST RATES

The US Treasury yields have risen further in the early Asian session today. Crucial long-term resistances are at current levels which we expect to hold and trigger a reversal. The price action in the coming sessions will need a close watch. The German yields continue to move up and are keeping our bullish view intact. There is room to rise further in the near-term. The 10Yr GoI moved up as expected yesterday. A further rise past the immediate resistance will negate our earlier bearish view.

The US 2Yr (0.11%) Treasury yield remains stable while the 5Yr (0.52%), 10Yr (1.24%) and 30Yr (2.03%)have risen further in the early Asian trades today. 1.25% (10Yr) and 2.05% (30Yr) are crucial levels which we expect to hold and trigger a reversal to 1%-0.90% (10Yr) and 1.80%-1.75% (30Yr) in the coming weeks. As mentioned yesterday a strong rise past 1.25% (10Yr) and 2.05% (30Yr) is needed to negate the broader bearish view.

The German 2Yr (-0.71%), 5Yr (-0.65%), 10Yr (-0.38%) and 30Yr (0.12 %) have risen further as expected. The bullish view is intact. The 10Yr has risen above -0.40% in line with our expectation and can now extend the upside to -0.30%/-0.25%. The 30Yr on the other hand is heading towards 0.15%-0.20% as expected. 0.20% is a strong resistance on the 30Yr from where it can reverse lower again.

As expected, the 10Yr GoI (05.77 GS 2030, 6.0969%) has tested 6.10% yesterday. The price action today will need a close watch. A strong break above 6.10% will pave way for a further rise to 6.15%-6.16%. It will then negate our earlier bearish view of seeing 5.98%-5.95% on the downside.

The 10Yr (05.85 GS 2030, 6.0221%) is heading up towards 6.03%-6.04% as expected. A further rise past 6.04% will negate the view of seeing 5.93%-5.90% on the downside mentioned yesterday.