Market Morning Briefing: Dollar Index Fell Sharply Yesterday From 93.52 To 92.98

STOCKS

Dow and Dax have sharply risen and while Dow looks bullish in the near term, Dax has to break above immediate resistance at 15700 to head higher. Nikkei, Shanghai, Nifty and Sensex all look bullish for the near term and have scope for some more rise before any indication of reversal is seen.

Dow (34764.82, +506.50, +1.48%) rose strongly overnight. While the rise continues, we cannot negate a test of 35250-35500 soon. DAX (15643.97, +137.23, +0.88%) has risen well but has immediate resistance at 15700 which if holds can produce a fall towards 15500-15400 again in the near term. On the flipside, the index needs to break above 15700 to head higher towards 16000 eventually. For now, watch price action near 15700.

Nikkei (30200.89, +561.49, +1.89%) has risen above 30000 as expected. As the index rises a re-test of 30500-30750 looks possible on the upside.

Shanghai (3639.96, -2.26, -0.062%) has dipped slightly today but while above 3600, view is bullish towards 3700-3750 eventually.

Nifty (17822.95, +276.30, +1.57%) rose strongly yesterday in line with our expectation of the target but contrary to expectation of a slow rise. It could pause for breath near 17850-75 today. But we cannot negate some more upside towards 18000 over the next 2-3 weeks before indicating a reversal from there.

Sensex (59885.36, +958.03, +1.63%) has also risen sharply. A pause near 60000 can be seen followed by a fall towards 58500-58000.

COMMODITIES

Brent and WTI have risen and have further room to rise towards $77/80 and $74/75 respectively now before coming down from there. Gold can test 1780 again if it holds above 1740/50 else a fall to 1700 cannot be negated. Silver is heading towards 23-23.5 as expected and copper is stuck near 4.20 but can slowly rise towards 4.40/50 level.

Brent (77.15) has risen as expected coming into the 77-78 resistance region which is likely to hold and produce a fall. Any break above 78 would take Brent to higher resistance at 80 from where the expected fall would then be seen. Overall upside is limited for the near term as we expect a sharp correction on the cards soon.

WTI (73.12) has risen above 73 and could test 74 or even 75 before falling off from there in the near term.

Gold (1750.20) fell to 1743 as expected but has bounced back from there. Support at 1740 seems to be holding well for now and while that holds, price can rise back to 1780/90. Failure to hold above 1740 can drag the price towards 1700 slowly, the next crucial support below 1740.

Silver (22.65) continues to rise and is headed towards 23-23.50 on the upside. Immediate view is bullish.

Copper (4.2110) has risen a bit and could be eventually headed towards 4.30/40 while the upmove continues.

FOREX

Ranged movement in Dollar Index but has scope to fall towards 92.75. Euro has held below 1.1750 and remains above support near 1.1665. A range of 1.1665-1.1750 is possible. A break above crucial resistance at 1.1800/10 is needed for any bullish signal. EURJPY is rising towards 130.50. Aussie and Pound have risen and look bullish. USDCNY and USDINR could be ranged within 6.44-6.47 and 73.60-73.90 respectively.

Dollar Index (93.44) fell sharply yesterday from 93.52 to 92.98. The index has again risen from yesterday’s lows and could head towards 93.20/40 again in the next few sessions with a possible fall to 92.75 on the downside. View is unclear just now on further direction.

Euro (1.1739) fell to almost test 1.1680 over the last 2-sessions before rising to 1.1750/60 on the upside which seems to be holding well as a decent immediate resistance just now.


Above 1.1750/60, there is crucial resistance near 1.1800/10 which if breaks would be an initial confirmation of a fresh upmove. Failure to break above 1.1800/10 would keep the exchange ranged below 1.18.

EURJPY (129.60) has been rising sharply and is headed towards 130-130.50 soon. Immediate view is bullish within the 128-130.50 range.

Dollar-Yen (110.40) has risen strongly to test the upper end of our mentioned range of 109-110.40. Above 110.40, it needs to further rise above 110.75/80 to move up further towards 111.50/60 in the medium term, else we may expect a decline from 110.75/80 back towards 110 or lower. Watch price action closely in the near term.

Aussie (0.7296) has bounced well and could be headed towards 0.7350 soon from where a decline looks possible in the medium term.

Pound (1.3721) tested 1.3750 before coming off slightly from there. A break above 1.3750 is needed for Pound to rise further towards 1.39 else we may expect a fall from current levels itself towards 1.3650-1.36 eventually.

USDCNY (6.4612) is stuck within a broad sideways range of 6.47-6.45/44 and could hold that for a few more sessions.

USDINR (73.6475) traded well within 73.60-73.80 as expected. We may consider a range of 73.60-73.90 over today and Monday before breaking on either side by end of next week.

INTEREST RATES

The US Treasury yields have risen sharply across tenors yesterday. Though there is room to rise further from here, strong resistances are coming up that can cap the upside. We expect these resistances to hold and the yields to reverse lower again. The price action in the coming days will need a close watch. The German yields have risen back again and can move up further if this bounce sustains. If so our view of seeing a fresh fall will get delayed.


The 10Yr and 5Yr GoI may consolidate in the near-term before seeing a fresh fall from here. The US 2Yr (0.26%), 5Yr (0.94%), 10Yr (1.42%) and the 30Yr (1.94%) have risen sharply yesterday. The 10Yr can test 1.45%-1.5%. The 30Yr has risen above 1.9% and can now test 2% from where it can turn down. The level of 1.5% on the 10Yr and 2% on the 30Yr are crucial resistances which we expect to hold and trigger a reversal. The price action at these levels will need a close watch in the coming days.

The German 2Yr (-0.70), 5Yr (-0.59%), 10Yr (-0.26%) and 30Yr (0.22%) yields have risen back sharply. The 30Yr has broken above the crucial level of 0.20%. If this sustains a further rise to 0.30%-0.35% can be seen. The 10Yr on the other hand has resistance in the -0.25%/-0.20% zone which will have to be broken for it to move up further. Overall, the fresh fall that we had expected to begin seems not to be happening immediately. We will have to wait and watch.

The Indian 10Yr GoI (6.1397%) had bounced from the day’s low of 6.1218% yesterday, Our view remains the same. 6.16% and 6.2% are strong resistances that can cap the upside and keep the broader bearish view intact of testing 6.1% and 6% on the downside. The 5Yr GoI (5.5787%) on the other hand has closed lower yesterday. It can trade in the range of 5.56%-5.64% in the near-term with a bearish bias to break the range on the downside and fall to 5.5% eventually.

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