Market Morning Briefing: Dollar-Yen Has Been Dragged Down By Weakness In The Dollar

STOCKS

Resistance at 33550 on the Dow is holding in line with our expectation. A break below 33000 can trigger the expected corrective fall. DAX has room to test 15500-15700 on the upside before witnessing a sharp reversal. Nikkei can come down within its 28000-30500/31000 range. Shanghai has come-off failing to break above the resistance at 3500 and can now come down to 3350. Sensex and Nifty can fall as long as they trade below their key resistances that are ahead.

The resistance in the 33500-33550 on the Dow (33430.24, −96.95, -0.29%) is holding now in line with our expectation. As mentioned yesterday, a fall below 33000 can trigger the corrective fall to 32000-31000 that we have been expecting for some time. A strong rise above 33550 is needed to take the index up to 33700-34000 and negate the fall to 32000-31000.

DAX (15212.68, +105.51, +0.70%) has moved up and keeps intact the view of seeing 15500-15700 on the upside. Our earlier view of seeing a corrective fall to 14000-13800 stands negated/will be delayed as long as the DAX remains above 15000.

Nikkei (29685.77, −10.86, -0.04%) has declined below 30000 and can fall to 29000-28500 in the near-term. Broadly, the 28000-30500/31000 range remains intact and the index can move down within this range now.

Shanghai (3453.82, −29.15, -0.84%) has come-off sharply today. The resistance at 3500 is holding well as expected and the index can fall to 3400-3350 again in line with our expectation. It will also keep alive the chances of seeing 3250-3200 on the downside.

Sensex (49201.39, +42.07, +0.086%) and Nifty (14683.50, +45.70, +0.31%) remained stable yesterday. While below 50000 (Sensex) and 14800-14900 (Nifty) the view of seeing a fall to 48000-47000 (Sensex) and 14200 (Nifty) will remain intact.

COMMODITIES

Commodities are overall stable. Crude prices tradew ell within our mentioned ranges while Copper ahs dipped a bit from levels near 4.15. We may expect the dip to be short lives as the price may soon move up again. Gold can rise towards 1760. Silver has immediate resistance near 25.25/30 from where a rejection can be seen dragging the price down to 24-23.

Brent (62.62) and WTI (59.22) both continue to trade within our expected range of 66-60 on Brent and 63.50-59/57 on WTI. As the prices are near to the lower end of the mentioned ranges, we may expect a bounce back soon.

Gold (1738.30) has risen and may head towards 1760 before facing a rejection from there again. A sharp rise above 1760 would be needed for Gold to turn bullish for the medium to long term.

Silver (25.10) has near term trend resistance near 25.25/30 which if holds could push the price down to 24-23 in the near term. View is bearish while below 25.30.

Copper (4.0915) rose to test 4.1520 yesterday before dipping back from there. While above 4.00, there is scope for a rise to 4.20/30. Downside could be limited to 3.90 over the medium term.

FOREX

Dollar Index trades lower and could take Euro up to 1.19 or higher in the near term. Aussie and Pound look ranged just now and need to cross important hurdles of 0.77 and 1.39 to move up further. EURJPY may test resistance near 131. Dolar Yen ahs support near 109.50 and while that holds, we keep chances of seeing a bounce back from there to 110.50-111 in the medium term. USDCNY could bounce from support near 6.54 while USDINR is likely to dip from 73.50.

Dollar Index (92.33) has dipped well from 93.50 over the last couple of weeks and we may expect a short corrective rise from 92.00 before resumption of the downtrend. A weak Dollar is supportive of strength for other currencies.

Euro (1.1869) has risen well and sustains above 1.1850. It may see a short corrective dip from 1.19 towards 1.1860/1.1850 before again rising higher in the medium term.

EURJPY (130.27) looks stable just now and could test 131 before falling back to 129.50-129 again in the medium term.

Dollar-Yen (109.73) has been dragged down by weakness in the Dollar. Note that immediate support is seen near 109.50 which if holds could produce another rise towards 110.50-111 in the medium term. Failure to sustain above 109.50 would indicate a near term top is in place and the pair may fall further.

Aussie (0.7655) may slowly rise towards 0.77 from where a possible rejection looks likely. A sharp break above 0.77, if seen would trigger further rise towards 0.78 in the medium term. But 0.77 is a crucial resistance in the very near term and looks likely to hold.

Pound (1.3822) has fallen back sharply yesterday rubbing of the gains seen in the previous session. While below 1.39, we may expect a ranged movement within 1.38-1.39 before breaking on either side in the next 3-4 sessions. A rise to 1.40 over the medium term cannot be negated.

USDCNY (6.5425) has dipped well and could test support near 6.54 which if holds could produce another rally towards 6.58/60 soon. Failure to hold above 6.54 may drag it down to 6.50 before bouncing from there in the medium term.

USDINR (73.2950) rose well from support near 73.20 yesterday and while that holds we may expect a test of 73.50 on the upside. If resistance at 73.50 holds, it could produce a dip towards 73.20/00 in the near term. Else a test of 73.60/80 cannot be negated. Watch price action near 73.50 today to decide on further movement.

INTEREST RATES

The US Treasury yields have dipped and can move down further in the near-term to test their crucial supports. But unless the supports are broken, the trend will continue to remain up. The German yields can continue to consolidate within their overall uptrend and remain bullish to see one more leg of rise before a reversal sets in. The 10Yr GoI is hovering above range support. The outcome of the Reserve Bank of India’ (RBI) monetary policy meeting today can provide the possible trigger to break the range on the downside and drag the yields lower that we have been expecting for some time.

The US 2Yr (0.16%), 5Yr (0.88%), 10Yr (1.67%) and 30Yr (2.33%) Treasury yields have come down further across tenors. We reiterate that 1.6%-1.55% (10Yr) and 2.25%-2.2% (30Yr) are crucial supports. While a test of these supports in the near-term cannot be ruled out, a strong break below 1.55% (10Yr) and 2.2% (30Yr ) is needed to indicate a top in place and confirm a reversal. While above 1.55% (10Yr) and 2.2% (30Yr) the yields can consolidate in the range of 1.55%-1.8% (10Yr) and 2.2%-2.5% (30Yr) for some time and the broader trend will continue to remain up.

The German 2Yr (-0.71%), 5Yr (-0.65), 10Yr (-0.32%) and the 30Yr (0.23%) remain stable. The view remains the same. While above -0.40% (10Yr) and 0.18% (30Yr) the outlook is bullish and the current consolidation is likely to see an upside breakout and trigger a fresh rise to -0.20%/-0.15% (10Yr) and 0.35% (30Yr). A strong break below -0.40% (10Yr) and 0.20% (30Yr) is needed to negate the bullish view.

The 10Yr GoI (6.1221%) remained stable above the lower end of its 6.10%-6.20% range. While above 6.10%, the sideways range can continue to remain intact for some more time. However, our broader bias remains bearish to see a break below 6.10% eventually and a fall to 6%-5.90% over the medium-term. The monetary policy outcome today will need a close watch to see if the yield is holding on to the sideways range or breaking it.