Market Morning Briefing: Dollar Index Rose To Test 90.78 Before Falling Off From There

STOCKS


Sell-off in equities continued on Friday as well and keeps the view bearish. Dow has declined below 30000 and can test 29000 while this break sustains. DAX has declined below 13600 and can test 13200. Nikkei has broken below 28000 and keeps the bearish view intact of seeing 27000 on the downside. Shanghai has tested 3450 as expected and can see a corrective bounce now before falling further. Sensex and Nifty can remain volatile today on the back of the Union Budget. The broader picture remains bearish but it will have to be seen if the Budget can provide some strong trigger to give a sustained reversal from here.


Dow (29982.62, −620.74, -2.03%) fell sharply on Friday and has closed just below 30000. As we have been mentioning for some time, the fall below 30000 will now pave way for a further fall to 29500 and even 29000 in the coming days indicating a reversal. 30500 will now be a good near-term resistance. The price action around 29000 will need a close watch as a break below it will trigger a further deeper fall.


DAX (13432.87, −233.06, -1.71%) fell-back sharply breaking below 13600. The view of seeing 13200 remains intact. As we have been mentioning since last week, 13200 will be an important support to watch. A break below it can trigger a deeper fall to 13000 and 12800 going forward. A short-lived bounce from 13200 to 13600 is a possibility before we see the above mentioned deeper fall happens.


Nikkei (27916.45, +253.06, +0.91%) has bounced-back well today after falling sharply below 28000 on Friday. We expect this bounce to be short-lived and also restricted to 28500. As such we retain our bearish view of seeing 27000-26500 on the downside going forward.


Shanghai (3481.14, −1.93, -0.05%) has tested 3450 as expected. While a corrective bounce to 3500-3550 is possible from here the current fall extending up to 3430-3400 going forward cannot be ruled out. As mentioned last week, 3400 is crucial support that will have to hold to keep the broader uptrend intact.


Sensex (46285.77, −588.59, -1.26%) and Nifty (13634.60, −182.95, -1.32%) had extended their fall on Friday as well. Nifty has tested 13600 as expected while the Sensex made a low of 46160.46 (slightly above the expected level of 46000). On the charts, while below 49000 (Sensex) and 14200 (Nifty) the bias will continue to remain bearish to see further deeper fall from a bigger picture. It will have to be seen if the outcome of the Union Budget today can provide some trigger for the indices to breach 49000 and 14200 from here and negate the danger of seeing a much deeper fall.


COMMODITIES


Crude prices are almost stable today but looks likely to show a sharp upmove in the medium term. Silver looks bullish towards 29 before seeing a dip from there while Gold may trade within the 1880-1820 region for now. Copper may test 3.45/40 while below 3.65.


Brent (55.13) and Nymex WTI (52.19) have been trading in a narrow range for a long and could be preparing for a sharp rise in the medium term. While above supports at $54 and $50-48 respectively, a sharp move on the upside looks more likely.


Gold (1859.60) tested 1880 on the upside on Friday before falling off from there. The immediate range of 1880-1820 seems to be holding well for now and an eventual rise towards 1900 and higher looks more likely in the medium term. Only a break below 1820, if seen would make Gold vulnerable to a sharp fall targeting 1780-1740. While above 1820, the view is bullish.


Silver (28.59) also rose sharply to test 27.77 on Friday and continues to trade higher today. A test of 29 looks possible in the near term before a possible dip back towards 27-26 is seen.


Copper (3.5660) is almost stable just now and while below immediate resistance near 3.65, we may expect an eventual dip towards 3.45/40 in the medium term.


FOREX


Most currency pairs look stable. Dollar Index and Euro are ranged within 91-90 and 1.2057-1.22 respectively while Aussie and Pound may remain below 0.77 and 1.3750. EURJPY may test resistance at 127.50 and see a decent dip from there while Dollar Yen has scope to test 105.20 on the upside. USDINR could be volatile on account of Union Budget but watch support at 72.80/75.


Dollar Index (90.57) rose to test 90.78 before falling off from there. We may expect a broad range of 91-90 to hold for the near term.


Euro (1.2127) looks stable just now within the broad 1.2057-1.22 region and could remain sideways within this broad range for now.


EURJPY (126.99) has moved up well but while below immediate resistance at 127.50, there is scope for a fall towards 126.50 in the near term. A sustained break above 127.50 is needed to take it higher.


Dollar-Yen (104.70) has risen well and could test 105.00-105.20 on the upside before falling off from there again in the medium term. The immediate view is bullish towards 105.20.


Aussie (0.7641) has dipped sharply towards 0.76 but needs to break below 0.76 in order to head lower towards 0.7550-0.75 in the medium term before seeing a bounce from there in the longer run. Else if Aussie holds above 0.76 immediately, we may expect a rise towards 0.77 or higher from the current levels itself. Wait and watch price action near 0.76.


Pound (1.3728) seems to be slowly moving up towards 1.3750 but could dip back towards 1.3650 or lower in the near term if 1.3750-1.38 holds as immediate resistance.


USDCNY (6.4594) has bounced ell from 6.42 and while that holds, a test of 6.48 could be possible on the upside. An overall broad range of 6.40-6.50 may hold for the near to medium term.


USDINR (72.92) could be volatile today on account of the Indian Union Budget 2021. Immediate support at 72.80/75 is seen on the charts while the upside is open towards 73.20. We will have to wait for a watch to see if immediate support holds well just now.


INTEREST RATES


The US Treasury yields have bounced-back sharply (at the far-end) from their key intermediate support. While this bounce sustains, a fresh rise is possible in the coming days which in turn will delay our broader bearish view of seeing a deeper fall. The fall in the German yields is also not happening in line with our expectations. Contrarily we now expect the German yields to move up from current levels. We will have to wait and watch the price action over the next few days. The 10Yr GoI oscillates in a narrow range within the broad 5.92%-5.98% and looks mixed in the near-term.


The US 2Yr (0.11%) and 5Yr (0.42%) Treasury yields remain stable while the 10Yr (1.08%) and 30Yr (1.84%)have risen sharply on Friday. While above 1%, the chances of seeing 0.90%-0.80% that we were mentioning last week stand negated. Instead, a rise to 1.2% is possible. 30Yr has tested 1.75% as expected and has bounced back. While this bounce sustains a fresh rise to 1.95%-2% is possible.


The German 2Yr (-0.74%), 5Yr (-0.74%), 10Yr (-0.52%) and 30Yr (-0.08%) yields have inched higher on Friday. Our bearish view of seeing -0.60% (10Yr) and -0.20% (30Yr) on the downside seems not to be happening very easily. The 30Yr has risen above -0.10%. While this sustains a further rise to 0% and 0.05% is possible. The 10Yr on the other hand can rise to -0.40% on a break above -0.50% which in turn will negate the bearish view. We will have to wait and watch.


The 10Yr GoI (5.9489%)is stuck in a narrow range between 5.93% and 5.96% within the broad 5.92%-5.98% range. We retain our view of testing 5.92% on the downside and break below 5.92% eventually to test .90% and 5.88%-5.86% on the downside in the coming days.



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