Morning market briefing: EURJPY holds well above support at 128
Remote movements observed in most stock market indices as resistance and immediate support hold. We need a break on either side of the fork to predict the next course of action. Dow and Dax are trading between 35500-36000 and 15900-15400 / 15000 respectively, while Nikkei and Shanghai are trading between 29750-29000 and 3550-3600 respectively. Nifty may trade between 17200 and 17600/800 while Sensex is bearish below 59000. Watch the price movement over the next few sessions to see if there is a breakout on either side of the ranges mentioned.
The Dow (35,804.38, -9.42, -0.026%) fell slightly. The index has support at 35,500 which may hold for now and we may see a test of 36,000 soon. As mentioned earlier, a strong breakout above 36000 is needed to see 36250. As such, we can expect sideways consolidation between 35500-36000.
The DAX (15878.39, -58.61, -0.37%) fell sharply and broke the support at 15900, hitting a low of 15740.60 yesterday. While below 15,900, a drop to around 15,400-15,000 comes into play.
The Nikkei (29,500.57, +197.91, + 0.68%) rose to 29,500 after falling sharply yesterday. The resistance is at 29750 can hold for now. A strong breakout above 29750 is needed for the view to be bullish towards 30,000/31000. Otherwise, a fallback to 29250-29000 is possible.
Shanghai (3584.81, -7.89, -0.22%) moved lower after testing immediate resistance at 3600. While below 3600 a drop to 3550 is possible before we see a strong breakout of each side.
Nifty (17415.05, -88.30, -0.50%) fell after testing intermediate resistance at 17600. The range of 17200-17600 / 800 holds above 17200. A strong breakout on either side is needed to form the next view.
Sensex (58340.99, -323.34, -0.55%) also opened higher but fell lower after hitting a high of 58969.12. The immediate view is bearish below 59000 to see a drop to 58000 eventually.
Stability is visible in most commodities, possibly because US markets are closed today. Gold has support at 1780/70 and as long as this holds, a rally to 1830/40 is possible in the medium term. Failure to stay above 1770 can lower it to 1760/40. Silver may fall to 23-22 while below 25. Copper has surprisingly risen contrary to our expectations of a fall to 4.30. Watch the price action to see if the price is rejected from 4.50 / 60 which is immediate resistance.
Brent (82.25) seems stable near levels seen yesterday. An immediate stress test towards 84/85 is possible before a decline sets in again towards 80-78-75 in the medium term. Look at the price action near 84/85. Some lateral consolidations seem more likely at the moment.
WTI (78.34) on the other hand has immediate resistance close to 80 which, if held, may again cause a drop to 75 in the short term. A break above 80, if observed and held, will trigger a further rally towards 82.
Gold (1794.10) tested 1786 before rebounding slightly from there. Immediate support is seen near 1780/70 which, if positions are held, may produce a rebound to 1830/40 in the near term. Failure to stay above 1770 may cause it to fall around 1760/40. The preference is to see a rebound in the 1770/80 region.
Silver (23.73) edged up slightly but although below 25 there is a possibility of a dip to 23-22 in the near term. A short side break is possible before going back down.
Copper (4.4635) rallied well towards 4.50 / 60 initially contrary to our expectation to see a drop towards 4.30 on the downside. We would now be watching 4.50 / 60 closely to see if price is rejected and falls back from the immediate resistance zone or manages to break higher indicating an uptrend towards 4.90. Look at the price action near 4.50 / 60.
The Dollar Index continues to trade higher, taking the Dollar Yen to levels above 115. A rise in the index to 98 is possible while it holds above 96.50, as the Dollar Yen may also aim for 118 longer term on a sustained rise above 116. Euro if falling a return below 1.12 may support a fall and soon drop to 1.11 / 10. EURJPY can trade between 130 and 128 before breaking on either side. The pound and the aussie may see a short corrective rebound, but are broadly bearish over the medium term. The USDCNY can trade between 6.37 and 6.40 / 42 while the USDINR can trade between 74.20 and 74.60 / 70.
The Dollar Index (96.758) has risen and continues to hold above 96.50. The index looks bullish for a rise to 97.50-98 shortly before a reversal occurs.
The euro (1.1212) dipped to 1.1186 yesterday but failed to stay below 1.12. The current rebound seems short-lived and we may not be able to reverse a fall below 1.12 and possibly target 1.11 / 10 on the downside as the Dollar Index moves towards 98.
EURJPY (129.36) is holding well above support at 128. As mentioned yesterday we need to watch price movement near 130 to see if it manages to break above 130 or fall back to 129-128 medium term. For now, below 130, we would expect ranged movement between 130 and 128.
The Aussie (0.7201) is trading near 0.72 and if it manages to break and hold it may fall further to 0.71 / 0.70 over the medium term. Watch the price movement to see if the Aussie immediately bounces from current levels or continues to decline.
The pound (1.3345) tested 1.3315 before rebounding from there. A short corrective bullish move is possible towards 1.34-1.3450 before a fall is seen again longer term towards 1.33 or below.
The dollar-yen (115.37) rose in line with the rising dollar index. A break above 115.50 would initially be bullish towards 116.0 to 116.25 before rising again. The medium term target above 116 would be 118.
The USDCNY (6.3884) is expected to continue trading within the 6.40 / 39-6.37 mentioned yesterday. A break above 6.40, if observed, may take the pair to 6.42, otherwise lateral consolidation could continue.
The USDINR (74.40) may trade between 74.20 and 74.60 before breaking either side to expand towards 74.00 or 74.80. a drop to 74 is more likely. Look at the price action in a range of 74.20 to 74.60 / 70.
US Treasury yields rose nearby as the far end plunged yesterday after a strong personal consumption expenditure release yesterday. The US PCE rose 5% (year-on-year) in October. Resistance on distant returns holds up well for now and we need to see if we get a further drop in the next few days from here to keep our wider range of trade intact. German yields remain higher and stable. A further rise from here will negate our previous view of seeing a fall. The 5-year and 10-year GoIs may continue to consolidate sideways for some time to come before they drop again.
The 2-year (0.64%) and 5-year (1.34%) US Treasury yields rose while the 10-year (1.63%) and 30-year (1.96%) yielded slightly . The resistance of 1.65% -1.68% holds up well for now. We’ll have to see if the 10-year can drop below 1.6% and drop to 1.5% -1.45% from here on out. The 30Yr, meanwhile, failed to break the 2% and may dip to 1.9% below 2%. Overall, our view of a wide range of 1.45% to 1.65% (narrow) / 1.35% to 1.75% (broad) over the 10-year and 1.75% to 2 , 1% / 2.2% over the 30-year period remains intact.
German 2-year (-0.76%), 5-year (-0.56%), 10-year (-0.23%) and 30-year (0.11%) yields continued to rise and remain stable. As mentioned yesterday, a rise beyond -0.2% (10 years) and 0.10% (30 years) will negate our bearish vision of a return to -0.45% and -0.5% (10 years) and -0.1% and -0.2% (30 years)). In turn, this will bring the returns up to -0.1% (10 years) and 0.2% (30 years). This in turn will negate our earlier bearish view of the view.
The 6.38% resistance on the Indian 10-year GoI (6.3678%) continues to hold up well to keep the narrow range of 6.3% to 6.38% intact. Although below 6.38%, a drop to 6.34% and below is possible in the short term. We expect 6.3% to 6.45% as a wider trading range (in case 6.38% is broken). But the bias remains bearish to break 6.3% and fall to 6.2% in the medium term.
The 5-year GoI (5.6967%) remains stable and maintains the wider range of 5.66% -5.75% / 5.78 intact. We expect the 5yr to break that range down below 5.66% over time and fall to 5.63% -5.62%.