Market morning briefing: Aussie rebounded well from 0.77
Dow has risen well above 34,000 and may remain in the 33,500-35,000 range as part of its broader uptrend. DAX has gained momentum and may reach 15,700-15800 before reversing lower. Nikkei failed to maintain the breakout above 28,000 and is expected to decline further in the coming days. Shanghai has broken its 3350-3500 range on the upside and may gain strength to see 3600-3650 on the upside on a breakout above 3525 from here. Sensex and Nifty are holding above their intermediate supports and may advance in the short term. But the larger picture is still weak below 15,100 (Nifty) and 50,000 (Sensex) to see a drop again.
Dow (34382.13, +360.68, + 1.06%) rose again and well above 34000. As mentioned on Friday, a range of 33500-35000 is possible while above 33500 in the current uptrend. 33500 and 33000 are crucial supports. Dow needs to fall below 33,000 to become under pressure and turn bearish.
DAX (15,416.64, +216.96, + 1.43%) surged and closed just above 15,400 last week. This increased the odds of seeing 15700-15800 – a crucial area of resistance on the upside. We expect 15,800 to cap the upside and DAX to reverse again around 15,200 in the future.
The Nikkei’s rebound (27907.51, −176.96, -0.63%) last week failed to hold above 28000. This keeps our bearish view intact of seeing 27000-26000. As mentioned on Friday, a sharp rise above 28500 is needed for the view to be bullish again.
Shanghai (3516.34, +25.97, + 0.74%) has risen sharply and is now trading above 3500 contrary to our expectation to come back down from 3500 and maintain the 3350-3500 range intact. The next major resistance is at 3525. A strong break above will be bullish to see 3600-3650 on the downside.
Nifty (14677.80, −18.70, -0.13%) and Sensex (48732.55, +41.75, + 0.09%) manage to hold above their mid-level support levels of 14600 and 48500 respectively. A sharp rise beyond 14800 (Nifty) and 49000 (Sensex) will be required to gain momentum and rise further towards 15000-15100 (Nifty) and 50000-50500 (Sensex). Otherwise, indices should remain under pressure to see 14400-14200 (Nifty) and 47000 (Sensex) lower. Price action in the coming days will require close monitoring.
Crude prices have rebounded a little but remain below significant resistance. We can look for remote movement in the rough for some time to come. Gold has rebounded well and could test resistance around 1860, where a breakout or rebound would decide the next move. Silver is holding above support at 27 and could test 28.0-28.50. Copper has immediate support at 4.60 which, if held, could take the price towards 4.80 / 90; otherwise, a drop to 4.40 cannot be undone.
Brent (68.95) and WTI (65.62) rebounded but remain below resistances of $ 70 and $ 67, respectively. A side range of 70-65.75 and 67-62.50 could hold in the medium term. Only a break on either side of the mentioned range will decide the next movement course. Until then, we were waiting and watching. The preference is to expect the respective resistances to hold over the longer term.
Gold (1850.40) also rebounded and did not see our expected fall at 1800. As gold is heading towards resistance at 1860, we need to closely monitor whether resistance holds or opens. the way for a further rise. If 1860 holds, we cannot rule out a possible fall again around 1800-1760, but a breakout above 1860 will increase the upward momentum by bringing prices towards 1900 or more and reducing the chances of a fall towards 1800-17600. Look at the price action around 1860 in the short term.
Silver (27.70) rebounded from support near 27 and may test 28.0-28.50 in the near term. The view is optimistic.
Copper (4.6630) has immediate support at 4.60 which, if held, could push copper prices towards 4.80 / 90 in the medium term. Only a break below 4.60, if seen, would indicate a decline towards 4.50 / 40 in the medium term. Look at the price action around 4.60.
The dollar index has plunged again and needs to hold above 90 to keep the upside possibilities alive, otherwise it could be vulnerable to a sharp drop over time. The Euro could test 1.22 before falling from there, while the EURJPY looks bullish towards 135. The Aussie and the Pound look stable between 0.77-0.7850 and 1.40 / 38-1.42. USDJPY may test 109 before rising from there. USDCNY may rise as long as above 6.43 / 42 while USDINR may hold between 73.50-73.25. Any break below 73.25 can pull the pair lower towards 73 which is crucial long term support.
The dollar index (90.386) fell sharply last week but it would be important to see if the index stays above support at 90 to recover to 91-91.50 in the near term. Only a break below crucial support at 90, if sight would make the view bearish, otherwise we continue to look for a rebound from 90.
The euro (1.2134) rose above 1.21 and could test 1.22 higher shortly before falling from there. The overall range of 1.22 to 1.2050 could be valid in the medium term.
EURJPY (132.67) is bullish to see a possible rise to 135.
The dollar-yen (109.32) fell slightly but could be limited to 109 on the downside, hence a rebound towards 110 seems likely. A wide range of 109-110 can hold for a while.
The Aussie (0.7759) has rebounded well from 0.77 and could trade between 0.7850 and 0.77 for a while.
The pound (1.4039) is holding above 1.40 and should continue to rise to recover towards 1.42 in the short to medium term. Any breakout below 1.40, if seen, can take the pound back to 1.38. Look at the orice action above 1.40.
The USDCNY (6.4373) fell sharply from 4.4570 last week. 6.43 / 42 is immediate support below current levels which must remain strong to produce a rebound towards 6.46 / 48 in the medium term.
USDINR (73.29) fell on Friday to close near the lower end of the 73.50 / 25 range. While the range is likely to continue today as well, a break below 73.25 should be seen for that the pair is bearish towards 73. Immediate resistance is seen towards 73.45 / 50. Note that 73 would be a strong support for Dollar-Rupee in the medium term.
Yields on US Treasuries came off sharply on Friday while intermediate resistance held up well. A further decline is possible in the coming days and the expected rise could be delayed. Overall, we can expect Treasury yields to trade in a wide range for some time. German yields are holding higher and keeping the bullish outlook intact to move up further from here. The 10-year GoI appears to be gaining strength to see a corrective rise before resuming the downtrend.
The 2-year (0.15%), 5-year (0.81%), 10-year (1.62%) and 30-year (2.34%) United States pulled back sharply on Friday from levels seen on Thursday last week. 1.7% over 10 years and 2.4% over 30 years are holding up well. While below these intermediate resistances, a drop to 1.5% -1.45% (10 years) and 2.2% -1.15% (30 years) cannot again be ruled out. A sharp increase beyond 1.7% (10 years) and 2.4% (30 years) is necessary to progress towards 1.8% (10 years) and 2.5% (30 years) over time.
German 2-year (-0.67%), 5-year (-0.52), 10-year (-0.13%) and 30-year (0.43%) yields remain higher. The bullish view is intact to see 0% (10 years) and 0.55% (30 years) while the returns remain above -0.20% (10 years) and 0.35% (30 years).
The 10-year GoI (6.0276%) rose and closed above 6.02%. It seems to be strengthening to see a corrective rise to 6.04% -6.06% and even 6.10% first in the next few days. Thereafter, the overall downtrend may resume its target of 5.95% to 5.9% in the medium term.