Market Morning Briefing: Aussie Has Dipped On Dollar Strength

STOCKS

All eyes on the US Federal Reserve meeting tonight. The outcome of this meeting could decide whether the crucial resistances on the equities will hold and trigger a corrective fall or not. As such we continue to remain cautious and are not very bullish on equities at the moment. 33100 on the Dow, 14600-14900 on DAX, 30000 on Nikkei and 3500 on Shanghai are the crucial levels to watch now. Will the Fed provide a trigger to break these levels and avoid a corrective fall that we have been expecting? Or will it pave way for a sharp correction? We will have to wait and watch. Sensex and Nifty are moving down within their respective range of 49000-52000 and 14600-15400. The bias is bearish to see a downside break of this range eventually.

Dow (32825.95, −127.51, -0.39%) hovers below 33000. Our view remains the same. We expect 33000 to hold and trigger a corrective fall to 32000-31000 initially in the near-term. As mentioned yesterday, a strong rise past 33100 will negate the view of seeing a corrective fall.

DAX (14557.58, +96.16, +0.66%) continues to oscillate between 14400-14600. We reiterate that 14600 and 14900 are strong resistances that can cap the upside. We expect to see a corrective fall towards 14000-13800 either from here itself or after testing 14900 on the upside.

Nikkei (29946.21, +25.12, 0.08%) is hovering below the crucial level of 30000.A strong rise past 30000 is needed for the index to gain fresh bullish momentum and rise to 32000-33000. While below 30000, the chances of 27000 on the downside cannot be ruled out.

Shanghai (3434.97, −11.76, -0.34%) is still struggling to rise past 3450 decisively. We reiterate that a strong rise past 3500 is necessarily needed to become bullish and also to negate the view of seeing 3250-3200 on the downside.

Sensex (50363.96, −31.12, -0.06%)remained lower but stable below 51000 yesterday. Our view of seeing a dip towards the lower end of its 49000-52000 remains intact. The broader bias is to see downside break below 49000 and a fall to 48000-47000 eventually in the coming days.

Similarly, Nifty (14910.45, -19.05, -0.13%) remains below 15000 and can test the lower end of its 14600-15400 range. While below 15400, the bias is negative to see a break below 14600 and a fall to 14200-14000 going forward.

COMMODITIES

Gold ahs attempted to rise a bit but needs to break above 1750 to keep the bullish momentum intact. Silver on the other hand has fallen below 26 and if it remains so we may look for a test of 25-24 in the near to medium term. Only a break above 26.30 would make it bullish. Copper may test support at 4 and bounce back. Failure to see a bounce from 4 could take it down to 3.80 before a fresh bounce is seen from there. Watch price action near 4. Crude prices are stable and may dip from here towards 6163 (WTI) and 65-66 (Brent) before bouncing back from there.

Brent (68.29) and WTI (64.75) have scope for a fall to 65-66 and 61-63 respectively before attempting to bounce back again in the medium term. On the upside WTI has crucial resistance near 70 which if holds well could keep the price lower for the medium term. Immediate view is bearish towards mentioned levels.

Gold (1732.20) is headed towards immediate resistance near 1740/50 which needs to hold to take Gold down to 1700 again. Only a sustained break above 1750, if seen would be bullish to take Gold higher towards 1800-1820 in the medium term. Watch price action near 1750 to get more clarity on further directions.

Silver (25.91) has dipped and as mentioned yesterday, only a sustained trade above 26.30 would turn bullish on Silver for the near term; else a fall back towards 25 or even 24 cannot be ruled out.

Copper (4.0580) is finding it difficult to break above 4.20 just now adnd hence may attempt a test of 4 before bouncing back from there. Note that the view is bullish while above 4; else a test of 3.80 on the downside cannot be negated before Copper attempts a sharp rise back towards 4.20.

FOREX

Currencies look mixed today. Dollar Index has risen back to test 92. While upside could be limited to 92.50, Euro may test 1.1850 or even lower in the near term before rising again from there. Aussie, Chinese Yuan and Pound look stable. EURJPY has fallen below 130 and ccould now test 129-128.50 before seeing any bounce again. USDINR is holding well above 72.40 and while that holds we may expect a range of 72.40-72.80 to hold for now. Rupee could weaken today on Euro weakness.

Dollar Index (91.925) has risen towards 92 but it would be important to see if it break above 92 to re-test 92.50 on the upside before coming off from there as that would drag down Euro towards 1.1850 or even lower in the near term. Immediate upside is likely to be limited to 92.50 on the Dollar Index.

Euro (1.1897) is attempting to break below 119 contrary to our expectation of seeing a ranged trade within 1.20-1.19. Failure to hold above 1.19 just now would open up chances of a fall to 1.1850 on the downside or even lower. Watch price action near 1.19.

EURJPY (129.80) has dipped on fresh Euro weakness and could re-test 129-128.50 on the downside before attempting to rise past 130 again.

Dollar-Yen (109.11) is heading towards resistance near 110 which if holds could pull the pair down to 108 or lower in the longer run.

Aussie (0.7734) has dipped on Dollar strength and weakness in Copper prices. A dip towards 0.77/76 could be possible before again rising higher.

Pound (1.3883) is stable and could spend some time within 1.40-1.38 before any break on either side is seen. View is neutral for now.

USDCNY (6.5025) looks sideways ranged above support at 6.48 and could eventually head higher back towards 6.55 soon. View is sideways to bullish while above 6.48.

USDINR (72.5550) Initial support at 72.40 mentioned yesterday has held well taking the pair towards 72.6375 as expected. It would be important to see if the pair holds above 72.40 for now or attempts to break lower in the near term Immediate trade range could be 7240-72.80 while we cannot rule out a possible test of 72.20/10 on the downside. Only a break above 72.80-73.00 would negate near term chances of a fall towards 72.20/10.

INTEREST RATES

The US 10Yr Treasury yield has risen back above 1.6%. For now on the charts, the outlook remains bullish. But, the US Fed meeting outcome tonight will need a close watch to see if it will set the path for the 10Yr to move up towards 2% or fall below 1.5% from here. The German yields remain stable. The outlook is bullish to see a further rise from here. The 10Yr GoI has dipped towards the lower end of its 6.18%-6.26% range. It will have to be seen if it will retain this range and move up or break below 6.18% and fall to 6.14%-6.10%.

The US 2Yr (0.15%) remains stable while the 5Yr (0.83%), (1.62%) and 30Yr (2.38%) Treasury yields have moved up again. The 10Yr has risen back above 1.6% and has to sustain above it in order to see a further rise to 2%. As mentioned yesterday, the 10Yr has to fall below 1.5% to come under pressure and negate the rise to 2%. The 30Yr remains bullish to test 2.5% while above 2.2%.

The German 2Yr (-0.70%), 5Yr (-0.65%), 10Yr (-0.34%) and 30Yr (0.19%) yields remain stable. While above -0.40% (10Yr) and 0.10% (30Yr) our view remains bullish to see a rise to -0.20%/-0.15% (10Yr) and 0.35% (30Yr) in the coming weeks. Only a strong break below -0.40% (10Yr) and 0.10% (30Yr) will negate the bullish view.

As expected, the 10Yr GoI (6.1803%) fell to test the lower end of its 6.18%-6.26% range. It will have to be seen if it can bounce-back today and break above 6.20% from here to keep the range intact. Failure to rise past 6.20% from here will be bearish to fall below 6.18% and test 6.14%-6.10% on the downside in the coming days.