Market Morning Briefing: Aussie Has Bounced Well From 0.7563

STOCKS

Global equities are showing signs of a sideways consolidation for some time rather than running into a sharp correction immediately which we have been expecting. The expected correction may happen after this sideways consolidation. We will have to wait and see. Dow may consolidate between 32000 and 33000/33100. Nikkei can trade sideways between 28000 and 31000 while Shanghai can be in the range of 3330-3470. Sensex and Nifty might bounce today following the other markets. However, they remain relatively weaker among the low for now with room for a further fall eventually. Overall, we continue to remain cautious on the equities.

Dow (32619.48, +199.42, +0.62%) tested 32000 and has risen back sharply. A sideways consolidation between 32000 and 33000/33100 is a possibility for some time before the expected break below 32000 and a fall to 31000 is seen. We continue to remain cautious and expect the upside to be capped at 33000-33100.

DAX (14621.36, +10.97, +0.075%) has risen back well from the day’s low of 14422.65. This keeps alive the chances of seeing 14900-15000 on the upside before the expected reversal is seen. From a big picture, we see the upside to be capped at 14900-15000 and a corrective fall to 14000-13800 can be seen eventually.

Nikkei (29151.80, +421.92, +1.47%) has risen further today and is trading above 29000. While this bounce holds, a further rise to 30000 and a sideways consolidation between 28000 and 30500/31000 cannot be ruled out. A fall below 28000 is needed to confirm the double top and bring in strong bearishness for a fall to 27000-26000 that we have been expecting. We will have to wait and watch.

Shanghai (3390.76, +27.17, +0.81%) is getting support at 3350. The broader view is bearish to see 3250-3200 on the downside. But a sideways consolidation between 3350/3330 and 3450/3470 can be seen for some time before the above mentioned fall happens.

As expected, Sensex (48440.12, −740.19, -1.51%) and Nifty (14324.90, -224.50, -1.54%) have broken below their crucial supports of 49000 and 14400 respectively. Though the indices may move up taking cues from the bounce in global equities, the upside could be capped. 50000 on Sensex and 14650/14800-14900 on Nifty are important resistances. We retain our broader bearish view of seeing 48000-47000 (Sensex) and 14200-14000 (Nifty) on the downside. The chances of this fall extending eventually to 46000 (Sensex) and 13800 (Nifty) cannot be ruled out.

COMMODITIES

Crude prices may remain in a range for some time before falling sharply while Gold and Silver look bearish for the near term. A fall in Gold below 1720 and below 25 in Silver could trigger a fall towards 1700 and 24 respectively. Copper may break below 4.00 to head towards 3.80 before a bounce is seen from there.

Brent (62.30) and WTI (59.03) have risen slightly but could be ranged within 60-66 and 57-62levels respectively. Thereafter, the prices can fall sharply towards 55-52 in the longer run.

Gold (1724.50) has dipped to test the lower end of the 1720-1760 range that we have been mentioning over the past couple of days. If the price sustains above 1720, we may expect a rise to 1760 over the coming days else a fall to 1700 or lower cannot be negated. Watch price action near 1720 today to see where the price closes for the week.

Silver (25.16) is bearish towards 25-24 while below near term resistance at 27.

Copper (4.0015) tested a low of 3.9525 before closing yesterday at 3.978, slightly below 4.00. While the price attempts to fall again today it would be important too see if it closes for the week above 4.00 or lower. A close below 4 would indicate a possible fall towards 3.80 in the coming week. Immediate view is bearish.

FOREX

Dollar Index trades higher that has dragged down Euro to levels below 1.18. Watch price action in the near term where the Dollar index has to remain below 93 else we may expect more weakness in global currencies over the coming 1-2 weeks. Aussie and Pound may rise a bit from current levels while USDJPY may rise to 109.50-110 before falling from there. USDCNY has risen sharply and could dip from 6.5575. USDINR may remain ranged within 72.40/50-72.70/80.

Dollar Index (92.77) tested 92.917 yesterday but has dipped from there. While below immediate resistance at 93, the index may fall back towards 92 or lower in the coming session. Only a break above 93, if seen and sustains, we may expect a further rise to test 94. While below 93 a fall over the next few sessions look more likely.

Euro (1.1779) has broken below 1.18 and cannot rule out a test of 1.1750-1.1700 on the downside before a reversal is seen. View is bearish while below 1.18.

EURJPY (128.68) has bounced from 128.29 tested yesterday. A break above 129 is needed to take the cross higher towards 129.50-129.75 again in the near term. Else we ay expect resumption of downtrend while below 129.0-129.5.

Dollar-Yen (109.21) has started to rise again and a break above 109.40 if seen and sustained could take it higher towards 110 on the upside before a dip from there is seen.

Aussie (0.7605) has bounced well from 0.7563 and if that sustains, we may expect a test of 0.7650-0.77 in the medium term. While above 0.76, view is bullish and can negate chances of testing 0.75/74 on the downside. Watch price action to see if 0.76 holds.

Pound (1.3759) has bounced from 1.3670 and while that holds, a rise to 1.38-1.3850 cannot be negated. View is bullish while above 1.3670.

USDCNY (6.5418) has risen sharply to our expected 6.54/55 levels and a break above 6.55-6.5575 would indicate sharp bullishness taking the pair higher towards 6.60 in the coming 1-2 weeks. Look for a dip from 6.55-6.5575 levels in the near term.

USDINR (72.6250) was almost stable yesterday between 72.6950-72.57. A break above 72.70 is needed to test upper resistance near 72.80, else we will have to allow for a range of 72.40-72.70 to hold today. Note that 72.80 is an immediate resistance which could hold on the first testing and produce a dip back towards 72.50/40. Watch price action near 72.70/80 on a rise today. On the alternative, a break below 72.40 would negate chances of a rise to 72.80 and bring in lower levels of 72.20/10 into the picture.

INTEREST RATES

The US Treasury yields are managing to hold higher. The trend is still up and there is room for the yields to move up further from current levels before a strong reversal is seen. The German yields are at their crucial support. Inability to see a strong rise from current levels will negate our earlier bullish view and in turn can drag the yields lower. The 10Yr GoI can remain sideways for some time before seeing a much deeper fall below 6.10%.

The US 2Yr (0.13%), 5Yr (0.82%) and the 10Yr (1.63%) Treasury yields remain stable while the 30Yr (2.36%) has inched slightly higher. Our view remains the same. While above 1.60%-1.50% (10Yr) and 2.20% (30Yr) There is room for the yields to move up further towards 1.8%-2% (10Yr) and 2.5%-2.6% (30Yr) in the coming weeks before a strong reversal is seen. A fall below 1.60%-1.50% (10Yr) and 2.20% (30Yr) is needed to indicate a top in place.

The German 2Yr (-0.73%), 5Yr (-0.70, 10Yr (-0.39%) and the 30Yr (0.17%) have dipped further. The 30Yr has dipped below the key support level of 0.20%. While this break sustains our earlier bullish view of seeing 0.35% on the upside will go wrong. The 10Yr is hovering just above the key support level of -0.40%. It will have to hold this support to keep our view of seeing a rise to -0.20%/-0.15% alive. The price action and the closing for today will be very crucial in deciding the path of move going forward.

The 10Yr GoI (6.1311%) rose to 6.1733% and has come-off from there. The broader view remains bearish to break 6.10% and fall to 6%-5.9% in the coming weeks. However, a sideways consolidation between 6.10%-6.20% cannot be ruled out before the above mentioned fall happens.