Market Morning Briefing: Pound Continues To Trade Within 1.38-1.40

STOCKS

Dow sustains above 32500 but needs to rise past 33100 to avoid a corrective fall from here. DAX keeps alive the chances of testing 14900-15000 before reversing lower. Nikkei and Shanghai look vulnerable for a fall. But they can consolidate sideways for some time before the expected fall happens. Sensex and Nifty have key resistances ahead which have to be broken to move up further from here and remain sideways for some more time. Overall, equities look likely to move into a sideways consolidation at higher levels before a sharp correction happens.

Dow (32731.20, +103.23, +0.32%) is managing to hold above 32500. Our view remains the same. 33100 is a crucial level which has to be broken to become bullish for a rise to 34000. While below 33100, the bias is bearish to see a corrective fall to 32000-31000. A break below 32500 can trigger this fall.

DAX (14657.21, +36.21, +0.25%) continues to hover higher. As mentioned yesterday, the chances of seeing 14900-15000 are still alive. However, we expect the upside to be capped at 15000. A sharp corrective fall to 14000-13800 is possible from the 14900-15000 resistance region.

Nikkei (29242.59, +68.44, +0.23%) can come under pressure for a fall to 28000-27000 on a strong break below 29000 now. While it manages to sustain above 29000, a sideways consolidation between 29000 and 30000/31000 is possible before the above mentioned fall to 28000-27000 happens.

Shanghai (3414.10, −29.34, -0.85%) looks vulnerable for a fall to 3250-3200. A break below 3400 can trigger this fall. However, a sideways consolidation between 3400-3460 or 3400-3500 is a possibility before the fall is seen.

Sensex (49771.29, −86.95, -0.17%)andNifty (14744, +186.15, +1.28%) remained stable yesterday. It will have to be seen if they can rise past 50000 (Sensex) and 14900 (Nifty) from here. Such a rise will keep the sideways consolidation intact and pave way for 51000-52000 (Sensex) and 15200-15400 (Nifty) in the coming days. However, from a broader picture we remain bearish to see a fall to 48000-47000 (Sensex) and 14200-14000 (Nifty) eventually.

COMMODITIES

Most metals look ranged for the near term with immediate resistances and supports intact. Watch for a break above 4.15 on Copper which would be a bullish confirmation; else a fall to 3.90 looks more likely. Crude prices have risen from immediate lows seen over the last couple of sessions but we may look for a re-test of those supports in the near term again. Gold needs to remain below 1760 to head lower. Silver is bearish while below 27.

Brent (63.85) has risen slightly from 62. Note that 62-60 would be a near term support region which if holds could produce a bounce back to 65-68 levels in the near term. Only a break below 60 would we focus on a much deeper fall.

WTI (60.84) on the other hand has scope for a test of 55. A range of 65-55 may hold for the near term.

Gold (1731.40) is trading lower unable to rise above 1760 just now. While below 1760, we may expect another dip towards 1700 or lower. Else a sharp break above 1760 is needed to take the price higher towards 1800 in the medium term. Watch price action near 1760 if a rise from current levels is seen.

Silver (25.66) has dipped and is bearish while below 27. A fall towards 25-24 cannot be negated in the near term.

Copper (4.1130) is trading just below the strong near term resistance at 4.15 and if that holds we may expect a fall towards 3.90 on the downside. Only a break above 4.15 if seen and sustains would turn bullish for the metal again.

FOREX

Dollar Index trades lower after a test of 92.15 on the upside. A fall could be expected in the near term from current levels if the index sustains trade below 92. Euro looks ranged within 1.1835-1.20 while EURJPY may also trades sideways within 131-128.50. Aussie may head lower on a break below 0.77 while Pound may head towards 1.38 in the near term. USDJPY may get support near 108.00-108.50 from where a bounce could take it higher towards 109.50-110. USDCNY may head higher and looks bullish towards 6.54 while USDINR may test 72.20/10 on a sustained trade below 72.40.

Dollar Index (91.85) has come off from 92.15 over the last couple of days. Note that there is immediate resistance near 92.50 which if holds could produce a sharp rejection back towards 91 or lower. Immediate view is ranged while above 91.30.

Euro (1.1927) tested 1.1873 yesterday before bouncing higher from there. A sideways range of 1.1835-1.20 may hold for the near term.

EURJPY (129.69) could be ranged within 128.50-131 for the near term. If 131 holds as a strong resistance then we may eventually look for a dip below 129-128.50 in the near term to indicate a reversal in trend.

Dollar-Yen (108.75) tested 108.50 yesterday but is again trading slightly higher just now. Note that 108.50-108.00 is an immediate support region and while that produces a bounce, we may expect a rise back towards 109.50-110 in the medium term. A break below 108 needs to be seen and sustained for the pair to confirm a reversal in trend.

Aussie (0.7713) has dipped a bit and seems to break below 0.77 to head towards 0.7625-0.7600 in the near term. Immediate view is bearish while below 0.7840.

Pound (1.3838) continues to trade within 1.38-1.40 and needs to break on either direction to give a directional clarity moving ahead. For now while above 1.38, we may expect sideways movement within 1.38-1.40 to hold well.

USDCNY (6.5116) is slowly inching up towards the upper limit of the 6.48-6.54 range. Immediate view is bullish while above 6.48/50.

USDINR (72.37) broke below 72.40 yesterday to close lower. If the pair manages to trade below 72.40 today also then we may expect a test of 72.20/10 on the downside followed by a bounce from there in the medium term. The broad range would now be 72.20/10-72.40/50 while the pair manages to trade below 72.40. A sustained rise above 72.40, would then bring in the earlier range of 72.40-72.60 into focus.

INTEREST RATES

The US Treasury yields remain higher and stable. The trend is still up and we see room for the yields to move further higher from here to test their crucial long-term resistances before a strong reversal is seen. German yields consolidate higher within their overall uptrend. The outlook remains bullish and a further rise is possible. The 10Yr GoI can consolidate sideways before witnessing a fresh fall.

The US 2Yr (0.15%), 5Yr (0.85%), 10Yr (1.68%) and 30Yr (2.37%) Treasury yields remain stable. The trend is still up. The 10Yr has support at 1.6% while above which a test of 1.8% and even 2% on the upside is possible in the coming weeks. Thereafter a strong reversal is possible. The 30Yr on the other hand has room to test 2.5%-2.6% on the upside.

The German 2Yr (-0.71%), 5Yr (-0.66%) and 10Yr (-0.31%) yields remain stable while the 30Yr (0.26%) has dipped slightly. Outlook remains bullish to see a rise to -0.20%/-0.15% (10Yr) and 0.35% (30Yr) in the coming weeks. A strong reversal can be seen thereafter.

The 10Yr GoI (6.1801%) sustains above 6.16%. A sideways consolidation between 6.16% and 6.21% is possible in the near-term. The bias is bearish to see a break below 6.16% and a fall to 6.14%-6.10% eventually.