August 3, 2022
  • August 3, 2022

Morning market briefing: Pound dipped slightly below 1.3750

By on August 25, 2021 0

STOCKS

Stocks continue to trade positively and remain bullish. The Dow may rise to 36,000. The DAX may test 16,000 to 16,200. The Nikkei may gain momentum on a breakout above 28,000 and rise to 29,000. Shanghai looks mixed and needs to break above 3560 to take a bullish impulse. Sensex and Nifty are bullish to test 57000 and 16700 respectively.

The Dow (35366.26, +30.55, + 0.09%) holds well above 35250. This keeps our bullish view intact to test 35500-35750 initially and 36000-36200 possibly in the coming weeks.

The DAX (15905.85, +53.06, + 0.33%) has been stuck in a 15600-16000 range for over two weeks. He is now heading towards the top of that range. Above 15600 the bias is bullish to see a breakout above 16000 and test 16200 higher.

Nikkei (27733.11, +1.01, + 0.004%) remains on the upside and may test 28000. As mentioned yesterday a strong break above 28000 will be needed to move up towards 29000. Otherwise, it may clear and stay within a narrow range of 27000-28000. Price action at 28,000 will require close monitoring.

Shanghai (3512.64, -1.83, -0.05%) hovers near the intermediate resistance level of 3520. A break above this level can take it to 3560. A sustained break above 3560 is necessarily needed to turn bullish again. A pullback of 3560 may drag it back to 3400. Overall, the picture is mixed.

Sensex (55958.98, +403.19, + 0.73%) tested 56000 as expected. The view remains bullish. The current upward movement has room to test 57,000 on the upside and then see a pullback from there.

Nifty (16624.60, +128.15, + 0.78%) broke above 16500 yesterday as expected and can now test 16700. A break above 16700 will strengthen the bullish momentum and bring the index to 16800-16850.

BASIC PRODUCTS

Commodities have reversed a bit after trading higher in the last 2 sessions. Gold has fallen below 1800, silver is heading towards 23 while below 24 copper may face resistance at 4.30 which needs to break in order to move towards 4.40 / 50 ; otherwise, a sharp drop from 4.30 is likely. Crude prices have fallen and could decline further in the very near term.

Brent (70.65) climbed to test 71.20 on the upside before starting from there as mentioned yesterday. Below 72.50 we can look for a return to 69-68 at first, then slowly to 65 again. Watch the price action near current levels.

The WTI (67.19) also tested 67.66 before coming out. Although below 67, a drop to 64 may be possible in the short term.

Gold (1796.20) failed to break past the 1800-1810 zone and instead fell below 1800. Gold must rebound immediately in order to rise, otherwise a return to 1780-1770 / 65 cannot be canceled at short notice. While below 1810-1800 the ionic view of gold will be bearish.

The silver (23.72) fell from 23.89 and while the[riceremainsbelow24thplaceforuntis23orevenloweratmid-termLookatthepriceactionnear23nowinthenextsessions[riceholdsbelow24thereisscopeforatestof23orevenlower23winthspriciumextmession[rizsemaintientendessousde24ilyaplacepouruntestde23oumêmeplusbasàmoyentermeRegardezl’actiondesprixprèsde23maintenantdanslesprochainessessions[riceholdsbelow24thereisscopeforatestof23orevenlowerinthemediumtermWatchpriceactionnear23nowinthenextfewsessions

Copper (4.2570) has moved above 4.20 but may face an intermediate trend resistance at 4.30 which needs to break in order to continue rising towards 4.40 / 50. Otherwise, a drop from 4.30 seems likely.

FOREX

Corrective declines seen in currency markets as the Fed prepares for its Jackson Hole meeting on Friday. The Dollar Index is trading near 93 and could test 93.30 on the upside. A wide range of 92.50-93.30 / 50 holds so far. The Euro is trading below 1.1750 and a fall to 1.17 cannot be ruled out. The Aussie and the Pound are stable but could take immediate declines before rebounding again to higher levels. EURJPY and USDJPY are respectively between 128-129.50 and 109-110.50. The USDCNY may climb to 6.49 / 50 above 6.47. USDINR needs to break above 74.20 to head higher, otherwise it could trade between 74.0 and 74.20.

The Dollar Index (93.03) rebounded as expected and is heading towards 93.30 while above 93. The immediate view is bullish from here. A wide range of 92.50 to 93.30 / 50 may hold for the moment.

The Euro (1.1735) is trading below the 1.1750-1.1780 region and as the decline continues we may need to allow a further test of 1.17 before a rebound is seen. The immediate view is bearish below 1.1765 / 75 which is immediate resistance.

EURJPY (128.85) is trading slightly higher today but has hovered in the 128.59-129.20 region for the past 1-2 sessions. A break on each side is necessary for the cross to test 128 or 130-130.50. Watch the price action near current levels to see which direction it chooses to move.

The dollar-yen (109.79) dipped to 109.41 yesterday before rebounding from there. The pair fluctuates strongly between 110.20 and 109.40. We continue to see a wide range of 109-110.50 to hold for now and unless a sustained breakout on either side is observed there is a lack of clarity on the future direction from here. .

The Aussie (0.7242) has fallen to 0.7271 and may expand to 0.72 on the downside before a rebound recurs which could eventually extend to 0.73 in the medium term.

The pound (1.3716) dipped slightly below 1.3750. We need to see if the decline holds or if the pound manages to rebound to 1.38 and above.

The USDCNY (6.4774) tested 6.4664-6.4654 before rebounding from there and could now head towards resistance near 6.49-6.50 soon. Immediate view is bullish above 6.47. Any break below 6.47 if seen again would open up possibilities for a fall to 6.45.

The USDINR (74.1975) rebounded to 74.20 from 74.10. We need to see if the pair manages to break above 74.20 to get closer to 74.40 / 50 or continue to trade in the narrow 74-74.20 region for a few sessions.

INTEREST RATE

Yields on the US Treasury rose. We’ll have to see if they can break their immediate resistance and see a corrective rally from here. Such a move will undo our vision of a decline that we have been mentioning for some time. Jerome Powell’s speech at the Jackson Hole meeting on Friday will be a crucial event to watch. German yields are holding above their major supports and a strong rebound from here may trigger a corrective rally within their wider bearish trend. The 5-year GoI can oscillate over a wide range and may change within this range in the short term.

The yields on 2-year (0.25%), 5-year (0.79%), (1.29%) and 30-year (1.91%) US Treasuries have increased over time. 1.3% on the 10yr is crucial and a sustained breakout above will negate the chances of testing 1.18% on the downside we have mentioned in recent days. In turn, this will pave the way for a further rise to 1.4% -1.45%. The 30Yr must remain above 1.9% to rise again towards 2% -2.1% and cancel the fall to 1.8%. Overall, this is a waiting situation.

German 2-year (-0.76%), 5-year (-0.74%), 10-year (-0.48%) and 30-year (-0.03%) rates remain stable. We will have to wait and see if yields rebound strongly from here in order to see a corrective rally to -0.30% / – 0.25% (10 years) and 0.10% (30 years). Thereafter, the wider downtrend may resume. Failure to see a strong rebound from here will leave yields in danger of falling to -0.6% (10 years) and -0.2% (30 years) from here.

The 5-year EBITDA (5.699%) remains higher and stable. As mentioned yesterday, we can expect it to be trading in a wide range of 5.63 / 62% -5.74 / 76%. Within this range, we see a good chance that the yield will move up to 5.74% -5.76% in the short term.