Market Morning Briefing: Dollar-Yen Is Trading Below 103

STOCKS

Equities continue to remain strong. Dow, Sensex, Nifty, Shanghai and Nikkei have room to move up further while the DAX is at its key resistance. Dow has room to test 31000. Sensex and Nifty can rise to 48500-48700 and 14300. Shanghai can test 3550-3600 and Nikkei has room on the upside to test 28000 before reversing lower. DAX needs to break above 14000 to see an extended rise. From a bigger picture, we expect the equity segment to see a sharp corrective fall as we see the current rise as the last leg of the ongoing rally. As such we will continue to approach the equity segment on a cautious note.

Dow (30606.48, +196.92, +0.65%) has risen well last week. The crucial resistance zone of 30800-31000 is likely to be tested now. We expect a sharp corrective fall to 29500-29000 from 31000. On the short-term charts (3-day and weekly), there is room to see an extended rise to 31500 before the correction comes into play in case if the Dow manages to breach 31000.

DAX (13718.78, −42.60, -0.31%) tested 13900 as expected and has come down slightly. The resistance at 13900-14000 is holding well in line with our expectation. A strong fall below 13500 is needed to confirm a top in place and trigger a deeper fall to 13200 initially and then to 12400 eventually. In case if DAX breaks above 14000 from here, the upside can extend up to 14500 before the correction to 12400 happens.

The expected rise to 27500 on the Nikkei (27315.83, −128.34, -0.47%) has happened and is also holding in line with expectation. The upside could be restricted to 28000. As such we will be looking for a sharp corrective fall to 25000-24000 in the coming months anywhere from the 27500-28000 resistance region.

Shanghai (3480.68, +7.61, +0.22%) has broken the 3180-3450 range on the upside. While above 3450, a further rise to 3550-3600 is possible now. The level of 3600 will be the next crucial level to watch which has to be broken in order to see a further rise.

Nifty (14018.50, +36.75, +0.26%) and Sensex (47868.98, +117.65, +0.25%) continues to trade strong and are retaining their strength. While above 14000, Nifty can rise to 14200-14300 in the coming days. Similarly, Sensex can rise to 48500-48700 while it remains above 47300.

COMMODITIES

Commodities trade higher and look fairly bullish for the near term. Brent and WTI can rise towards 55 and 50-52 respectively while Gold could be headed towards 1940-1980 on the upside. If Silver sustains above 27, it could rise towards 28-29.50 while Copper needs t sustain above 3.50 to move up towards 3.65/70 in the near to medium term.

Brent (52.06) has been trading within a narrow range of 51-52 for the last one week without showing any major movement while Nymex WTI (48.75) traded within 48-49 region. We may expect a gradual rise towards 55 and 52 respectively on Brent and WTI in the near-term. Immediate view is bullish.

Gold (1923.20) rose slowly from 1880 during the last week and now has risen sharply above the immediate resistance near 1915 indicating further bullishness in the near term towards 1940-1980 on the upside.

Silver (27.25) has also moved up sharply breaking above immediate resistance near 27. Sustenance above 27 would open up chances of testing 28-29.50 on the upside soon. View is bullish for Silver.

Copper (3.5675) has been holding well below the resistance near 3.65 and above the support at 3.50. A break below 3.50 if seen in the near term would indicate a possible fall towards 3.40-3.35 before another sharp bounce is seen. Else, we may expect a rise from current levels itself towards 3.65/70 over the next few sessions.

FOREX

Most currencies look strong and has further room on the upside. USDCNY and USDINR can test 6.40 and 72.80/75 before a reversal is seen while Dollar Yen may head towards 102 as Dollar Index falls to target 89 initially. EURJPY and Euro looks strong just now and could move up towards 127.27 and 1.2350 respectively in the near term. Aussie may test 0.78 while Pound has scope for a rise to 1.38. The new year could expect initial strength in most currencies for at least the next couple of weeks.

Dollar Index (89.686) has held below 90 on Friday and while the immediate resistance at 90 holds, we may expect a fall in the index towards 89 or even 88 in the longer run.

Euro (1.2250) has scope for a re-test of 1.23-1.2350 which needs to break on the upside to head higher towards 1.25 in the longer run. For now while above 1.2150, view is bullish for a possible test of 1.2350.

EURJPY (126.19) continues to trade within 125.85-127.27 region unable to decide which direction to move towards. Currently trading near the lower end of the range, we may expect a rise to 126.80-127 soon on the upside. Immediate view is bullish.

Dollar-Yen (102.98) is trading below 103 and could be headed towards immediate support at 102 in the next few sessions as Dollar Index continues to fall towards 89. Immediate view is bearish on Dollar Yen.

Aussie (0.7715) has been rising over the past few sessions and looks bullish for a rise towards 0.78 in the near term. Immediate view is bullish.

Pound (1.3692) has risen well and could move up towards 1.38 on the upside if the current rising momentum remains intact. View is bullish towards immediate resistance at 1.38.

USDCNY (6.4868) has slumped below 6.50 and while that sustains, it poses further Yuan strength towards 6.40 over the next couple of weeks.

USDINR (73.1250) is expected to open lower today with a possible test of 72.80/75 on the downside. NDF offshore rate quotes at 72.88 just now indicating a lower Dollar Rupee on the OTC market. We may expect a bounce from 72.80/75 in the near term.

INTEREST RATES

The US Treasury yields remain stable and have chances of seeing an extended rise in the coming weeks before the long-term downtrend resumes. The German yields have key resistances that can cap the upside from here and keep them under pressure to see a fresh fall. The 10Yr GoI can see a near-term bounce and then can reverse lower to see a deeper fall.

The US 2Yr (0.12%), 5Yr (0.37%), 10Yr (0.94%) and the 30Yr (1.67%) have been trading stable over the last couple of weeks. The 10Yr and 30Yr are stuck in a narrow range of 0.90%-0.95% and 1.64%-1.70% respectively. It will have to be seen if the 10Yr can breach 1% or not in the coming days. While above 0.80% a break above 1% and an extended rise to 1.1% and even 1.25% is possible over the next couple of months. Similarly, while above 1.60%, the 30Yr has room to test 1.85% on the upside before a fresh fall happens.

The bounce in theGerman 2Yr (-0.73%), 5Yr (-0.75%), 10Yr (-0.58%) and the 30Yr (-0.17%) yields that has been in place since the second week of December seems to be losing momentum. Our view remains the same. -0.50% (10Yr) and -0.10% (30Yr) will be a cap on the upside. The broader downtrend is likely to remain intact. We expect the yields to fall back to -0.70%/-0.80% (10Yr) and -0.30%/-0.40% (30Yr) in the coming weeks.

The 10Yr GoI (5.9004%) can get support near 5.88% and bounce to 5.92%-5.94% in the near-term. We expect the upside to be capped at 5.94% for now. While below 5.94%, the outlook is bearish to see a break below 5.88% and fall to 5.82%-5.80% over the medium-term. A strong rise past 5.94% is needed to negate the bearish view.