Monday, April 23, 2018
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Market Morning Briefing: Dollar Index Has Again Dipped From Levels Seen Yesterday
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STOCKS

Important to watch the FOMC meeting today. Stocks seem to have exhausted the Bull Run and may trade sideways or see a short dip in the coming sessions.

Dow (26076.89, -1.37%) has come off a bit from levels near 26700. While below 26700, it could test interim support near 25700 over today and tomorrow.

Dax (13197.71, -0.95%) came off further to test 13200 as expected and could be headed towards 13000 in the coming sessions. Near term looks bearish for Dax while below 13400. A bounce from support near 13000 could be expected in the medium term.

Nikkei (23267.22, -0.11%) has paused near 23200. We need to see if it come down to test 23000 or trades sideways for a few sessions.

Shanghai (3468.82, -0.55%) has been falling sharply from levels just below 3600. This is an important resistance visible on the 3-Day candles and while that holds, downside scope towards 3400 is open.

Nifty (11049.65, -0.73%) is trading at important support levels near 11040 and a break below this levels could indicate that the bull run is possibly over for now and the index may start to come off towards 10980 in the coming sessions. Sensex (36033.73, -0.69%) is likely to test 35750 on the downside in the coming sessions. Near term looks bearish.

COMMODITIES

Brent (68.45) has interim support at 68 and the upside resistance is now shifted to 71-72 levels. While above 68, there is scope of moving up towards 72; else a fall towards 65 could be seen in the coming sessions. WTI (63.91) has fallen sharply compared to the Brent Crude and could test 63.0-62.8 on the downside.

Brent-WTI spread (4.51) has been falling sharply from levels near 7.0 and has found some support near 4.0. There could be a pause in the spread just now but there is room on the downside towards 3.5. Note that a rise in the spread could either indicate a rise in Crude Prices or a stable WTI while Brent continues to fall some more.

Gold (1339.67) is likely to test 1325-1320 in the coming sessions. Near term looks bearish just now.

Copper (3.1865) tested a low of 3.15 support before moving to slightly higher levels. While above 3.12-3.15, there could be scope of a bounce back in the near term. But in case the price breaks below 3.12, medium term could be bearish towards 3.10-3.07.

FOREX

Dollar Index (89.162) has again dipped from levels seen yesterday (it reached a high of 89.64) and is currently trading in the 89.10-89.20 range. Two out of the 3 important events, as mentioned yesterday (Trump’s State of the Union address, the Fed’s meeting and US employment data on Friday) are underway currently. The markets seem to be treading cautiously prior to the FOMC meeting and it will be interesting to see whether the Fed sticks to a hawkish tone or switches to a dovish tone in light of recent positive economic data from the US. In case of continued hawkishness, we could expect Dollar Index to again test resistance near 89.5 on the daily candles.

Euro (1.2427) has gained some strength after it came to light that the Euro zone economy has had its best year (in terms of growth) in a decade. If the bullish sentiment persists and the FOMC meeting doesn’t affect dollar strength positively, we could see Euro move up to test resistance near 1.2475 on the daily candles. In case of Dollar strength a near term drop towards support near 1.2275-1.23 on the weekly candles could take place.

Dollar-Yen (108.89) is back below 109 as the currency markets wait to see the FOMC’s stance. The Bank of Japan had raised the inflation outlook for Japan to ‘stable’ in their last meeting (in Jan) prompting traders to expect policy tightening by the BoJ this year. This might be keeping Dollar Yen below 109 currently. However, rising US yields can be expected to affect dollar strength against the Yen soon, pushing the rate above 109. The next target on the upside is near 109.5 (seen as resistance on daily candles).

Euro-Yen (135.31) has gone up against our expectations as the Euro has seen strengthening in light of better economic data. With US yields expected to weaken Yen (against the Dollar) in the coming days and the Euro continuing to gain strength, we might just see Euro-Yen staying above 135 for now. There is support near current levels (135.0-135.2) on the daily, 3 day and weekly line charts which could hold for now.

Pound (1.4165), like Euro, has also strengthened against the Dollar . It is currently near resistance (just below 1.42) on the 3 day candles. If the dollar strengthens globally against all currencies in the near term, we should see this resistance hold. (this is also seen as resistance on weekly line charts).

Dollar Rupee (63.6050) could see a test of 63.50 today. We don’t know if it will break or hold. Have to see what the market does and go with that.

INTEREST RATES

Bond yields globally are consolidating today after yesterday’s rise. However, the phase of volatility might not be over yet.

US 10 Yr (2.7068%), 30 Yr (2.9576%), 5 Yr (2.4903%) & 2 Yr (2.1123%) are all down compared to levels seen yesterday. With the Dow coming off a bit, we might be seeing some of the euphoria start shifting from equity towards bond markets. If that turns out to be correct, we could see some further correction in yields.

Yield spreads continue to remain above respective support levels as yield curve flattening is at a pause. US 10 Yr-5Yr (0.2165%) is above 0.2% for now (seen as support on short term charts) and US 30 Yr – 10 Yr (0.2508%) is above 0.24% (seen as support on long term charts)

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