Market Morning Briefing: Euro Has Risen Slightly While Above 1.12

STOCKS

Amongst the equity indices mentioned below, Nikkei and Sensex have fallen sharply but we need to see if that can impact the Asia-Pac indices If not the equities globally. Nikkei is leading losses in the Asia-Pac region as fresh Covid rising cases create concerns and upon possibility that the US FED could speed up policy tightening. Dow looks stable below resistance near 29000/29500 and can dip to 28000 before rising while Dax can rise to 16000/16100/16400 before falling from there. Shanghai may trade within 3600-3550-3500 region for now. Sensex needs to break above 59000 to turn bullish.

Dow (35804.38, -9.42, -0.026%) has come down slightly. The index has support at 35500 which can hold for now and send the index up to test 36000. A strong break above 36000 is needed for the view to be bullish towards 36250/36300. Immediate view is to see trade within 35500-36000 region.

DAX (15917.98, +39.59, +0.25%) has risen. The support is seen at 15900 which can hold for now and send the index to test 16100 and 16400 eventually.

Nikkei (28779.63, -719.65, -2.44%) has fallen sharply on possibility of US FED policy tightening to speed up and fresh concerns of new Covid variant and rising cases . The Japan stocks lead the fall in the Asia-Pac region as growth stocks and travel/aviation stocks face a hit. While below 29500/29000 a further fall towards 28000 is possible before we see a bounce from there.

Shanghai (3566.87, -17.31, -0.50%) has come down but still trading above 3550. A bounce from there towards 3600 is possible. If we see a break below 3550 then a fall towards 3500 can be seen. We need to see if the fall in Nikkei impacts Shanghai or will Nikkei rise back immediately from current levels.

Nifty (17536.25, +121.20, +0.70%) has bounced from 17200 support. The interim resistance is at 17600 which if broken can take the index towards 17800. However if the resistance holds then a dip towards 17300/200 can be seen again. Overall broad range of 17200-17800 holds for now.

Sensex (58795.09,, +454.10, +0.78%) has risen yesterday. Resistance can be seen at 59000 which can drag the index towards 58000 again.

COMMODITIES

Gold has bounced slightly from support near 1780 and can head towards 1810/30 while Silver can remain narrowly ranged above 23. Copper can trade within 4.50/60-4.30/35. Crude prices have dipped and could fall towards supports near 78/77 on Brent and 75 on WTI before again moving up in the medium term.

Brent (80.86) has dipped again but fell from 83 itself without testing 84/85 as expected. While below 83, we may expect a fall back to 78/77 initially before falling deeper in the longer run. Immediate range of 83-77 looks likely within which a fall can be seen initially.

WTI (76.67) is holding below 79 and can dip to 75 before rising back from there.

Gold (1795) has risen well as support near 1780 is holding well for now. A rise to 1810/30 is possible while above 1780.

Silver (23.56) is ranged near current levels in a very narrow region and may continue so unless we see a sharp movement on either side.

Copper (4.4185) has dipped from 4.50 as expected. A range of 4.60-4.40/30 may hold for now.

FOREX

Most currencies are stable. Dollar Index has dipped slightly but can resume its uptrend again towards 97.50-98. Euro has bounced from 1.12 but if the Dollar Index breaks above 97, Euro can fall to 1.11/10 before posing a reversal from there. Aussie is bearish to 0.71/70 while Pound may hold above support at 1.33 to see a short corrective rise. EURJPY and USDCNY may remain ranged within 130-128 and 6.40-6.37. USDINR is likely to hold below 74.60/70, else a rise to 74.80/75.00 can be seen before reversing from there.

Dollar Index (96.731) has dipped from this week’s high of 96.938. While below 97, a short corrective dip to 96.25/20 can be possible before bouncing back higher to test 97.50-98.00 which would be the next crucial resistance to watch.

Euro (1.1221) has risen slightly while above 1.12. A rally in Dollar index towards 98, if seen can drag down Euro to levels below 1.12 towards 1.11/10 before posing a reversal from there in the medium term. Overall the fall could be limited to a maximum of 1.10 in the coming weeks.

EURJPY (128.69) is trading within 128-130 region and unless a break on either side is seen the range may continue to hold. We would turn bullish on the cross only on a sustained break above 130.

Aussie (0.7145) has broken below 0.72 as warned yesterday and could now head towards 0.71/0.70. View is bearish for the near term.

Pound (1.3303) may hold above 1.33 and see a corrective bounce to 1.34-1.3450 before a fall is again seen in the longer run back to 1.33 or lower. For now watch price action near 1.33.

Dollar-Yen (114.78) has not been able to break above 115.50 and instead has come off sharply from this week’s high of 115.52. While below 115.50, a dip to 114-113.50 looks possible before resuming the upward rally again. Our expected rise to 116.0-116.25 is not negated but can be delayed by some sessions.

USDCNY (6.3910) has moved up towards the upper end of the 6.40/39-6.37 range mentioned yesterday. A break above 6.40, if seen can take the pair up to 6.42 else sideways consolidations could continue between 6.40/39 and 6.37.

USDINR (74.40) has risen to 74.60 on the NDF market on the back of dip seen in the US Dollar Index. We continue to look at crucial immediate resistance near 74.60/70 which needs to hold for USDINR to come down towards 74.20/00. Failure to decline from 74.60/70 can take the pair higher towards 74.80/75.00 in the near term before the said decline is seen. Watch price action near 74.60/70 for now.

INTEREST RATES

The US Treasury yields have come down across tenors. The range resistances are holding well, and the yields can dip further within their expected sideways range. Our view of seeing a broad consolidation in the Treasury yields remains intact. The German yields have dipped slightly but need to fall further from here to avoid a rise beyond their resistances and keep our view of seeing a reversal intact. The 5Yr and 10Yr GoI continue to trade stable and can remain in a broad sideways range for some more time. The bias is bearish to see a downside break their ranges eventually.

The US 2Yr (0.61%), 5Yr (1.30%), 10Yr (1.60%) and the 30Yr (1.93%) have come-off across tenors. The resistance at 1.65%-1.68% has held well on the 10Yr. A dip below 1.6% can drag it to 1.5%-1.45%. The 30Yr has come down after testing 2% and can dip to 1.9%-1.85% now. The broader view of seeing a sideways consolidation between 1.45%-1.65% (narrow) / 1.35%-1.75% (broad) on the 10Yr and 1.75%-2.1%/2.2% on the 30Yr remains intact.

The German 2Yr (-0.76%), 5Yr (-0.58%), 10Yr (-0.25%) and 30Yr (0.09%) yields have dipped slightly. The resistances at -0.2% (10Yr) and 0.1% (30Yr) seems to be holding for now. But a further fall from here is needed to keep our view of seeing a reversal intact. As being mentioned here over the last couple of days, a strong rise past -0.2% (10Yr) and 0.10% (30Yr) will pave way for a further rise to -0.1% (10Yr) and 0.2% (30Yr) and negate our bearish view.

The Indian 10Yr GoI (6.3671%) is stuck in a narrow range of 6.36%-6.38% over the last few days. We reiterate that 6.3%-6.38% could be the range of trade and a dip to 6.34%-6.32% is possible while below 6.38%. From a bigger picture, 6.3%-6.45% will be the broader range of trade (in case if 6.38% is broken) and the bias is bearish to see a break below 6.3% and a fall to 6.2% eventually over the medium-term.

The 5Yr GoI (5.6928%) is slowly inching down within its broad 5.66%-5.75%/5.78 range. While the immediate outlook is mixed and unclear, it looks likely that the 5Yr can dip to 5.66% – the lower end of the range while it sustains below 5.7%.

November 26, 2021 at 03:53PM
Kshitij Consultancy Service
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