Market Morning Briefing: Euro Has Bounced Well From 1.20

STOCKS

Lack of strength in equities keeps intact our view of seeing a corrective fall going forward. Whether the fall happens from here itself or after a near-term consolidation is not very clear at the moment. Dow is holding below 31650 and is likely to break 31000 and fall to 30000 with limited upside from current levels. DAX remains stable within the 13800-14200 range for now and the bias is bearish to see a downside break of this range eventually. Nikkei and Shanghai can fall from here itself while they remain below 30000 and 3575. Sensex and Nifty have key resistances ahead at 51000 and 15000 respectively from where they can reverse lower again.

The intermediate resistance at 31650 is holding well on the Dow (31391.52, −143.99, -0.46%) . As mentioned yesterday, 31000-32000 could be a possible near-term range. Our broader view will be to see a break below 31000 eventually and test 30000 initially. A further break below 30000 will then confirm that a top is in place. Whether this fall happens from here itself or after an extended rise to 32500-33000 is not very clear at the moment.

DAX (14039.80, +26.98, +0.19%) is inching higher within the 13800-14200 range. Our view remains the same. We expect DAX to test 13200 on the downside in the coming weeks. But this fall can get delayed if it breaks the current range above 14200 in which case an extended rise to 14500-14600 can happen first before the fall to 13200 is seen.

The resistance at 30000 on Nikkei (29450.20, +42.03, +0.14%) is continuing to hold. Our view of seeing a fall to 28000 remains intact while Nikkei remains below 30000. A near-term consolidation between 29000 and 30000 is a possibility before the above mentioned fall happens.

Shanghai (3533.83, +25.24, +0.72%) is continuing to hold above 3500 but will have to rise past 3575 decisively to move up further. The chances of seeing a break below 3500 and a fall to 3450-3400 is still alive. However, as mentioned yesterday, 3450-3400 is a strong long-term support zone which can limit the downside and a fresh rally is possible thereafter.

Sensex (50296.89, +447.05, +0.90%) and Nifty (14919.10, +157.55, +1.07%) had moved up as expected following the global markets. But as mentioned yesterday, 51000 on the Sensex and 15000 on Nifty are crucial levels which have to be broken to turn bullish again. As long as the indices trade below these levels, our view of seeing a fall to 48500-48000 (Sensex) and 14250-14200 (Nifty) will remain intact.

COMMODITIES

Gold and Silver have bounced well from lower supports and while they hold, immediate view is bullish. Crude prices have risen a bit but we cannot negate a fall towards respective supports before a sharper rise is seen. Immediate view is bullish for Gold, Copper and Silver while Crude may remain ranged. Watch for the OPEC meet tomorrow that could bring in some volatility in crude prices.

Brent (62.93) and WTI (59.92) have both bounced slightly from yesterday’s lows but overall look ranged for now. A possible test of 62-61 and 59-58 respectively still remains on the cards.

Gold (1731.20) has bounced well from low of 1704.6 yesterday. While 1700 is holding for now, we may expect a bounce towards 1740/50 in the near term. However, further downside can only be negated on a sustained rise above 1760 in the near term.

Silver (26.72) too tested 25.82 yesterday but has bounced back above 26 without sustaining lower levels. While above 25.82/26.00, we may expect a bounce back towards 27-28 levels soon.

Copper (4.1825) tested 4.0415 as expected and has bounced well from there. While above 4, there is scope for a rise back to 4.20/25 on the upside. Only a break below 4 would trigger anymore further bearishness for future. Till then we may expect support near 4 to hold.

FOREX

Dollar Index has fallen below 91 again and could be ranged within 91.50-90.50 for a few sessions. A break on either side would then give clarity on further movement. Euro may remain within 1.21-1.20 while EURJPY may test 130. Aussie and Pound may test 0.79 and 1.40/41 while USDJPY may test 107 from where a rejection looks possible. USDCNY looks ranged for now and USDINR may fall towards 73.20/00 in the near term.

Dollar Index (90.82) has fallen back from 91.40 instead of moving further up. While above 90.50 there is scope for a rise to 91.50 or even higher again.

Euro (1.2083) has bounced well from 1.20 and while that holds, we may expect 1.21-1.20 range to hold for now.

EURJPY (129.10) has bounced well too and could attempt to re-test 130 in the near term from where a dip looks possible.

Dollar-Yen (106.85) continues to rise and could test 107 which is an immediate resistance above current levels and may hold to produce a rejection back to 106-105.50 levels in the medium term. Only a failure to fall from 107 would open up chances of rising higher towards 108. Watch price action near 107 for now.

Aussie (0.7824) has risen well in line with other currencies and may test 0.79 in the near term before seeing another corrective dip.

Pound (1.3960) has bounced well from 1.3858 and while the rise sustains a re-test of 1.40/41 looks possible. Immediate view is bullish.

USDCNY (6.4651) continues to look ranged and unless a sharp break on either side of 6.44-6.48 region is seen, there is lack of clarity on further direction from here.

USDINR (73.3625) traded within 73.30-73.50 region within our mentioned broad range of 73.00/20-73.80 to hold for a few sessions. Currently the NDF quotes 73.23 indicating a possible fall to 73.20 on the OTC market today. While a test of 73.20 looks likely, we may also expect a break below 73.20 to enter the 72.90-73.00 range soon before another bounce is seen from there. Immediate upside in that case could be limited to 73.50, revised from 73.80 mentioned yesterday.

INTEREST RATES

The US Treasury yields remain lower and stable. Key supports are there for the yields below current levels while above which the outlook is still bullish to see a rise again. Those supports have to be broken to turn the view bearish. The German yields are coming down gradually. But strong resistance-turned-supports are poised below current levels from where they can reverse higher again and keep the uptrend intact. The 10Yr GoI has risen sharply and keeps the bullish view intact. A further rise is possible in the coming days.

The US 2Yr (0.12%), 5Yr (0.67%), 10Yr (1.41%), 30Yr (2.21%) continues to trade lower but stable. Our view remains the same. The trend is still up as long as the yields stay above 1.30% (10Yr) and 2.10% (30Yr). While above these levels, a rise back to 1.55%-1.60% (10Yr) and 2.50% (30Yr) cannot be ruled out. A strong fall below 1.30% (10Yr) and 2.10% (30Yr) is needed to turn the outlook bearish and negate the above mentioned rise.

The German 2Yr (-0.71%), 5Yr (-0.65%), 10Yr (-0.35%) and 30Yr (0.14%) remains stable after coming-off sharply on Monday. As mentioned yesterday, the 10Yr has an important support in the -0.35%/-0.40% region. A bounce from there will keep the bullish view intact of seeing -0.20% and -0.15% on the upside. The 30Yr on the other hand has dipped below 0.15% but can get support at 0.10% again. While above 0.10%, the outlook will remain bullish to see 0.35% on the upside over the medium-term.

The 10Yr GoI (6.2362%) has risen back sharply from the low of 6.1877% yesterday. Our bullish view is intact of seeing 6.28%-6.30% on the upside. As mentioned yesterday, the price action near 6.30% will need a close watch to see for a reversal.