Friday, February 23, 2018
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Market Morning Briefing: Dollar-Yen Continues To Stay Below 109
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STOCKS

Dow (26616.71, +0.85%) continues to move up and could be headed towards 27000 or higher in the near term. Dow looks bullish.

Dax (13340.17, +0.31%) has come off sharply from levels near 13700 and while below 1340, downside scope is open towards 13000.

Nikkei (23749.33, +0.50%) is almost stable near current levels. But Dollar Yen on the other hand may test support near current levels of 108.80 or slightly lower and could bounce back towards higher levels of 109-110 in the coming sessions. That if seen, could prove to be bullish for Nikkei back towards 24000-24200 levels. We need to wait and watch for further confirmation.

Shanghai (3552.05, -0.17%) has also come off from 3588 and may trade within 3600-3525 region for the coming sessions. Near term looks range-bound.

Nifty (11069.65, -0.15%) and Sensex (36050.44, -0.31%) were stable on Thursday, last week. We need to see if the indices are able to move above the recent highs (seen last week) or moves sideways with a possible dip in the coming sessions. We prefer a short dip towards 10900 on Nifty and 35750 on Sensex.

COMMODITIES

Brent (70.43) is looking stable for now. A rise above 71.35 is necessary to continue to move up in the coming sessions. Although while we expect a short dip from current levels, the price movement does not indicate any lack of bullish momentum just now and is poised to move higher in the near term. On the other hand, WTI (66.35) has moved above immediate resistance near 65 last week and 65 may now act as a near term support. WTI looks bullish just now for the coming sessions.

Gold (1348.17) tested 1366 on the upside before coming off sharply from there. Immediate support is visible near 1340 which if holds could keep the price stable within 1340-1370 region for a few sessions before the price moves up towards 1380-1400 in the medium term.

Copper (3.2205) came off below 3.2250 again and is likely to remain within the broad channel levels of 3.1250-3.2500 for the next few sessions.

FOREX

Dollar Index (89.283) might be on course to test support on daily and weekly line charts near 88.5-88.8 this week. On the daily candles, upside for the Dollar Index in the near term looks restricted to 89.5. With a further rise in bond yields (see Interest Rates below), it looks like higher yields are still not impacting the Dollar positively and it would be interesting to see how long this continues.

Euro (1.2401) could find immediate support near 1.24 on the daily candles for now. The ECB kept its rates constant in last Friday’s meeting in face of a robust Euro; however, markets seem to have expected an even more dovish stance, which wasn’t seen, thereby leading to continued strength in Euro. Euro could again test resistance near 1.25 on the weekly line charts if it stays above 1.24.

Dollar-Yen (108.91) continues to stay below 109, impacted by the Bank of Japan chief’s comment that inflation is finally nearing targets, thereby increasing the likelihood for raising of interest rates in future. There is support near 108.5-108.75 on the weekly line charts which should hold for now.

Euro-Yen (134.99) might well target levels near 134.5 if Dollar Yen comes down further to 108.5 and the Euro stays around 1.24. In case there is some weakening in the Euro towards 1.235, Euro-Yen might test support near 134 on the daily candles before moving up.

Pound (1.4117) is currently trading below resistance near 1.42 on the 3 day candles. In case it breaches this resistance again, there is higher resistance near 1.44 on the weekly candles which should hold in this week.

In case Dollar-Rupee (63.60) rises past 63.70, then we can look for 63.80-90. However a rise in the major currencies relative to the Dollar could pull Dollar Rupee down towards 63.40 as well.

INTEREST RATES

US 10 Yr (2.6842%), 30 Yr (2.9324%), 5 Yr (2.4920%) & 2 Yr (2.1283%) are again at record highs as they are seemingly impacted by low GDP numbers in USA.

The volatility in bond yields continues for now, with the 10 Yr- 5Yr spread (0.1922%) just below support on the short term charts and the 30 Yr-10 Yr spread (0.2482%) nearing support near 0.24% on the long term charts. There could be some pause in flattening though from these support levels.

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