Monday, February 19, 2018
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Market Morning Briefing: The Aussie Trades Higher
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STOCKS

Stocks are overall mixed. Almost all indices have rallied enough in the past few months and is likely to come off, they lack bearish momentum and are unable to see follow through selling. A further rally from current levels in the coming weeks would be surprising.

Dow (25803.19, +0.89%) was closed today and with resumption of trade today, a test of 26000 or higher is possible in the coming sessions. Overall the index looks bullish.

Dax (13200.51, -0.34%) is falling eventually. A break below 13200 would take it further down towards 13000, else a bounce back to 13400 is possible.

Nikkei (23845.50, +0.55%) has moved up instead of coming down from levels near 23800. This raises doubts of whether the index would be bearish in the coming sessions. The bull strength doesn’t seem to have exhausted yet and a fight for another upmove looks eminent while the index stays above 23500. A sharp break below 23500 is needed to turn bearish over the medium term.

Shanghai (3425.34, +0.44%) also surprised a bit by bouncing from levels near 3400 instead of coming down further. While resistance near 3440-3450 levels hold, we may expect a fall towards 3380 or lower in the coming sessions.

Nifty (10741.55, +0.56%) and Sensex (34843.51, +0.73%) both moved up sharply breaking our immediate targets of 10750 and 34750 respectively. A break above 10800 on Nifty could take it higher towards 11000 in the medium term while Sensex may head towards 35250.

COMMODITIES

Brent (70.03) is trading at crucial resistance at 70 from where we expect a corrective fall towards 69-68 levels in the near term. Price action near current levels would be important to keep an eye on.

WTI (64.53) has moved up and is likely to come off a bit from 65 before again resuming its rise in the longer term.

Gold (1341.16) is almost stable near previous levels and could be soon headed to test previous high of 1357 seen in Sep’17 before again seeing a short corrective dip. Near term looks bullish.

Copper (3.2665) rose sharply from 3.20 and may move higher to re-test resistance near 3.35 in the coming sessions.

FOREX

Stronger than expected rise in the Euro (1.2266), past 1.2220 to a high of 1.2297. From these levels, it ought to see come correction/ consolidation down towards 1.2220 at least. However, IN CASE of a break above 1.2300, we have to look for 1.24-25 on the upside before exhaustion. The market will, most likely, go Long into the ECB meeting on 25th Jan (next Thursday). Plenty of time for it to move up to 1.24-25, if it wants to. But, the ECB is not going to like the Euro strength. Be careful there.

As expected, the Euro-Yen (135.83) is closing in on 136 and might try to rise further to 138, either in a straight line, or after a couple of days of consolidation.

Dollar-Yen (110.71) saw a low near 110.32. We take this as kind of meeting our target of 110, because there is Support near 110.30-20 on the 3-day and Weekly candles. Look for a bounce back towards 112 while this Support holds.

On the Pound (1.3797), we had pointed out a Resistance near 1.3820-50 on the Daily candles. It has seen a high near 1.3819 yesterday and there’s a decent chance that the Resistance will hold on first testing, producing a small dip towards 1.3700. In case of a break above 1.38, we have to be ready for much higher levels, near 1.40.

The Aussie (0.7963) trades higher, as expected, but is yet to test its horizontal Resistance at 0.80 on the Weekly Line chart. Expect some profit-taking there.

Although Dollar-Rupee (63.49) dipped below target to a low near 63.33, it bounced back into Close. Now we need to see if it comes down from here because of Resistance at current levels on the Euro-Rupee (77.95) and Yen-Rupee (0.5735) or whether it rises past 63.55-60. We prefer a rise, given the near-term Oversold condition in Dollar-Rupee.

INTEREST RATES

The US 10Yr (2.5462%), 30 Yr (2.8443%) & 5 Yr (2.3499%) yields continue to maintain their levels seen in the last couple of days. If there is no significant upmove seen in bond yields for few more sessions, it would reflect further build up of confidence in the bond markets, which could lead to some correction in yields towards 2.5%, 2.8% and 2.3% respectively. However medium / long term outlook on bonds continues to be bearish with upside targets for the 10 Yr and 30 Yr at 2.62% and 2.9-3% respectively.

We remain bullish on the US 10 Yr- 5 Yr spread (0.1963%) & 30-10 Yr Spread (0.2981%), which could see a bounce soon from respective supports.

Japanese 10 Yr Yield (0.078%) could remain ranged between 0.07% and 0.088% in the next few days before any significant upmove is seen beyond resistance near 0.088%.

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