Market Morning Briefing: Aussie Has Bounced From 0.77

STOCKS

Equities seem to lack strong follow-through rise to move further higher. Our cautious stance remains intact and we will be looking for a sharp corrective fall in equities going forward although some upside is possible from current levels in some indices. The resistance at 33100 on the Dow is holding well and the index can fall on a break below 32500. DAX has its upside limited to 14900-15000 and can see a reversal from there. Nikkei has come-off sharply over the last couple of days and can see a deeper fall on a break below 29000. Shanghai can consolidate before falling further. Sensex and Nifty have recovered sharply on Friday. Have key resistances are ahead for them which can cap the upside and drag them lower again.

Dow (32627.97, −234.33, -0.71%) has come-off further on Friday. Failure to sustain the break above 33000 last week keeps our view of seeing a corrective fall to 32000-31000 intact. A break below 32500 can accelerate the fall. As mentioned last week, a strong rise past 33100 is necessarily needed to negate a corrective fall from here.

DAX (14621, −154.52, -1.05%) has come-off on Friday. The chances of seeing 14900-15000 is still alive. But as we have been mentioning, the upside is likely to be capped at 15000 and a corrective fall to 14000-13800 can be seen in the coming weeks. A sustained break above 15000 is needed to negate this fall.

Nikkei (29248.90, −543.15, -1.82%) has declined further sharply today. The reversal from last week’s high of 30485 leaves the chances high for Nikkei to break 29000 and see a deeper fall to 28000-27000 in the coming days.

Shanghai (3433.13, +28.46, 0.84%) can consolidate sideways between 3400 and 3500 for some time. A strong break above 3500 is needed to avoid a fall to 3250-3200 that we have been cautioning for some time.

Sensex (49858.24, +641.72, +1.30%)andNifty (14744, +186.15, +1.28%) had recovered sharply on Friday. However, it will have to be seen if they can sustain higher. 50000 on Sensex and 14800-14900 on Nifty are crucial levels that have to be breached in order to move up further. Our broader view remains bearish to see a fall to 48000-47000 (Sensex) and 14200-14000 (Nifty) eventually.

COMMODITIES

Crude prices trade lower but could trade within a broad range with bias tilted towards the downside. Gold trades below crucial resistance near 1750/60 which needs to break on the upside to see further bullishness else a fall back to 1700 or lower cannot be negated. Silver is likely to be ranged within 25-27 while Copper looks bearish below 4.15 and could dip towards 3.90 on the downside. While most commodities look sideways to bearish, we would keep a close watch on immediate supports and resistances.

Brent (64.22) tested a low of 61.60 last week and if it manages to remain above 60, we may expect a bounce back towards 65-68 levels in the near term else a break below 60 may drag the price down towards 55 in the medium term. WTI (61.09) on the other hand has tested 58.5 before bouncing from there. While above 55, we may expect a range of 55-65 to hold for the near term.

Gold (1735.80) is capped below immediate resistance of 1750/60 and needs to break above this level to turn bullish towards 1800. While below 1760, view is bearish for another fall from 1750/60 region.

Silver (25.78) is bearish while below 26.50-27.00. A ranged movement within 27-25 could be possible for the medium term. Unless a break on either side of this range is seen, it would be difficult to get clarity on further direction.

Copper (4.1095) has strong near term resistance at 4.15 and while that holds we may expect a fall towards 3.90 on the downside. View is bearish below 4.15.

FOREX

Dollar Index trades higher but may face rejection from 92.50 failure of which could take it higher towards 93+ levels. Euro has dipped below 1.19 and has scope for a fall to 1.1835 before seeing a bounce from there. Aussie and Pound look ranged within 0.7625-0.7840 and 1.38-1.40 respectively along with EURJPY which could trade within 128.50-131 for the near term. USDCNY too looks ranged between 6.48-6.54 for the medium term. USDINR needs to hold above 72.40 to remain within 72.40-72.60/80 for the near term. Else a break below 72.40 may trigger a fall to 72.20/10 before a bounce from there is seen. Watch price action near 72.40 today.

Dollar Index (92.05) has risen and could re-test 92.50 on the upside before declining from there. Failure to decline from 92.50 would make the index bullish for a rise to 93.20.Such a rise if seen above 92.50 would make other global currencies weak against the dollar.

Euro (1.887) has fallen below 1.19. A sideways range of 1.1835-1.20 could hold for the near term as our earlier range of 1.19-1.20 has been broken on the downside. An immediate fall to 1.1835 cannot be negated while below 1.19.

EURJPY (129.83) fell to test 128.93 but has bounced back well from there. Our mentioned range of 128.50-131 may hold for the near term. Watch out for a possible break above 131.

Dollar-Yen (108.83) is slowly inching lower and could test immediate support at 108 from where a bounce to 110 cannot be negated. However, a break below 18 would confirm reversal and lead to a sharp decline in the coming days. Watch price action near 108 in the coming sessions.

Aussie (0.7719) has bounced from 0.77 and while that holds a rise back to 0.78 cannot be ruled out. A broad range of 0.7625-0.7840 can hold for the near term.

Pound (1.3829) has fallen sharply from 1.40 over the last two sessions and needs to break on either side of the 1.38-1.40 range to give a directional trend for the near term. For now while above 138, we may expect sideways movement within 1.38-1.40 to hold well.

USDCNY (6.5108) is ranged within 6.48-6.54 region and needs to break on either side of the range to throw some directional clarity. For now we may expect the mentioned range to continue for a few more sessions.

USDINR (72.5125) may test support at 72.40 but we would keep a close watch to see if it holds or gives way for a fall to 72.20/10. While above 72.40, we may expect a range of 72.40-72.60/80 to hold for the near term.

INTEREST RATES

The US Treasury yields have come-off in early Asian trades. But the broader view continues to remain bullish and there is room for the yields to move up further before a strong reversal is seen. The German yields continue to remain bullish and can move up in the coming days. The 10Yr GoI looks vulnerable for a sharp fall on a break below 6.16%.

The US 2Yr (0.15%), 5Yr (0.85%), 10Yr (1.68%) and 30Yr (2.39%) Treasury yields have come-off well especially at the far-end in the early Asian session today. 1.6% and 1.5% are important supports on the 10Yr. While above these supports, the outlook is bullish to test 1.8% and even 2% on the upside in the coming days. The 30Yr can test 2.5% and may even have room to extend the rise to 2.7%-2.9%. The 30Yr has to fall below 2.2% to negate the above mentioned rise.

The German 2Yr (-0.71%), 5Yr (-0.65%), 10Yr (-0.30%) and 30Yr (0.28%) have dipped across tenors on Friday. However, the broader view continues to remain bullish. The 10Yr can rise to -0.20%/-0.15% and the 30Yr can test 0.35% on the upside. Thereafter a reversal is possible.

The 10Yr GoI (6.1927%) is getting support near 6.16% but has to rise past 6.20% decisively in order to test 6.26% on the upside again. The bias is bearish to see a break below 6.16% and a fall to 6.14%-6.10% eventually going forward.