Mon, Oct 03, 2022 @ 08:56 GMT
HomeContributorsTechnical AnalysisMarket Morning Briefing: Dollar-Yen Is Stuck Within A Narrow Range Above 107

Market Morning Briefing: Dollar-Yen Is Stuck Within A Narrow Range Above 107

STOCKS

Equities continue to trade stable and retain their sideways range. The sideways consolidation can continue for some more time. Within this range the bias remains positive to see an upside breakout of the current range and a short-term rise going forward. However, as we had cautioned earlier, after this short-term rise we would be looking for a fresh leg of fall as the market could Sell in May and go away. For we prefer the 23000-24000/24200 range on the Dow and 10100-10800 on DAX to remain intact. Nikkei and Shanghai can trade in the range of 19000-2000 and 2800-2850 respectively. On the domestic front 9000-9400 on Nifty and 30000-32000 on Sensex is the range that can be seen.

Dow (23775.27, +260.01, +1.11%) is inching higher towards the upper end of our preferred 23000-24000/24200 range. We prefer to see an upside breakout above 24200 and a rise to 24500/24700/25000 before we see a fresh leg of fall targeting 21000 again. While 24000/24200 holds now, the index can continue to trade sideways for some more time.

DAX (10336.09, −177.70, -1.69%) remains stuck inside the 10200/100 – 10700/800 range. The near-term view is mixed and the index can oscillate inside this range for some more time. However, our bias continues to remain positive to see an upside break above 10800 and a rise to 11000-11300 and then see a fresh leg of fall.

Nikkei (19683.11, +421.11, +2.19%) is remains between 19000 and 20000 and is heading towards the upper end of this range. We expect the Nikkei to break this range on the upside and rise to 20200-20500 initially and then to 21500 eventually in the short-term. Thereafter a fresh leg of fall is possible.

Shanghai (2827.66, +19.13, +0.68%) tested 2800 and has bounced-back from there. The 2800-2850 range remains intact and a rise to 2850 can be seen now. While above 2800 our bullish view remains intact to see a break above 2850 and a rise to 2870-2880 and 2900 initially and then to 3000-3100 eventually over the medium term.

Nifty (9154.40, -159.50, -1.71%) and Sensex (31327.22, -535.86, -1.68%) are struggling to gather momentum. The indices can remain stuck in a narrow range of 9000-9400 (Nifty) and 30000-32000 (Sensex) in the near-term. Broadly the bias is bullish to see a rise to 9600-9700 while Nifty sustains above 9000 and 34000-34500 while the Sensex remains above 30000.

COMMODITIES

Rising crude inventories and lower crude demand continues to weigh heavily on Crude prices dragging them lower again. Concerns that the production cuts may not be fast enough to cope up with the storage capacity, crude prices trade lower. It would be important to watch inventory levels for the week ended 24th April. Gold trades a bit higher and looks bullish for the near term. Silver is stuck in the narrow range and could attempt to move up towards the upper limit of the range. Copper has moved up but watch resistance above current levels.

Brent (21.46, June futures) and Nymex WTI (15.91, June futures) both trade slightly lower today. WTI has immediate resistance near 20 and is likely to remain below that for now. A short rejection from 20 looks possible in the near term. Brent on the other hand, has scope to rise towards 27.50 in the coming sessions before facing a dip from there. Watch upmove to respective resistances in the next 3-4 sessions.

Gold (1741.20) trades above immediate support at 1720 and while the price continues to rise, there is enough room on the upside towards 1780-1800. View is bullish while above 1720.

Silver (15.41) is stuck within the narrow 15-16 region (revised from earlier 14-16). A break on either side is needed now to decide on further direction from here.

Copper (2.3805) has risen sharply and could test 2.40 just now. A rise above 2.40 is needed to give some bullish indication for the near term.

FOREX

Dollar Index (100.15) has fallen slightly but continues to trade above 100. Immediate trade is likely to be seen in the 100-101 region just now but a break on either side would be necessary to indicate further direction. Failure to see a sharp movement on either side could let the 101-100 range continue for some more time.

Euro (1.0823) has risen well from levels near 1.0727 seen last week and could now test upper resistance near 1.0850 in the next 2-3 sessions. A sharp rise past 1.0850 would be needed to take it higher. Watch movement in Dollar index closely as it remains stuck in the narrow 100-101 region.

Dollar-Yen (107.33) is stuck within a narrow range above 107 and while that holds we may expect sideways consolidation to continue in the 108.5-107 region.

EURJPY (116.21) has immediate resistance near 116.50-117 now and while the exchange rate remains lower, there is scope for a fall towards 115-114 in the medium term. View is bearish while below 117/116.50.

Aussie (0.6433) has moved up and is trading near crucial medium term resistance. A rise from here is needed to give indication of a possible rise towards 0.66-0.67 in medium term; else a rejection from here could bring it down again towards 0.63-0.62 (looks less likely). A break above current levels looks more likely for now.

Pound (1.2397) is trading slightly higher today but could test resistance near 1.25 in the near term from where a rejection looks possible. Watch price action near 1.25 in the near term.

USDCNY (7.0782) has dipped slightly but needs to fall below 7.06 to confirm bearishness for the near term at least towards 7.03/00. While above 7.06, bullish sentiment remains intact.

USDINR (76.46) rose to almost test 76.50 as mentioned in the previous edition. A rejection from 76.50/60 is expected to take the pair down from here today possibly towards 76.20. Day’s range could possibly be seen in the 76.55-76.20 region today.

INTEREST RATES

The US Treasury yields can remain stable in the near-term. There is room on the downside to test their supports over the next couple of weeks after which we might see some recovery on the Treasury yields. The US Federal Reserve meeting outcome is due on Wednesday. The German yields remain bearish and can fall in the coming weeks. The European Central Bank (ECB) meeting is on Thursday. The 10Yr GoI has bounced from its crucial support and can move higher now within the preferred range.

The US 2Yr (0.22%) and 5Yr (0.36%) Treasury yields remain stable while the 10Yr (0.61%) and 30Yr (1.18%) have inched slightly higher on Friday. Our view remains the same. We expect the yields to dip in the near-term and then to bounce-back again. The 10Yr can fall to 0.50%-0.40% in the next couple of weeks and then reverse higher. The 30Yr on the other hand can test to 1.10% from where it can bounce-back again.

The German 2Yr (-0.73%), 5Yr (-0.67%), 10Yr (-0.48%) and 30Yr (-0.09%) yields have declined further across tenors on Friday.. The bias remains negative and we expect the resistances at -0.40% on the 10Yr and 0.04% on the 30Yr to cap the upside. While below these resistances the outlook is bearish to see a fresh fall to -0.70% (10Yr) and -0.30% (30Yr) in the coming weeks.

The support in the 6%-5.95% has held very well and the 10Yr GoI (6.1668%) has bounced-back sharply on Friday. Inability to breach 6.20% can drag the yield again lower to the 6%-5.95% support zone. But a strong break above 6.20% will pave way for a further rise to 6.30% and 6.40% again this week. Broadly we will be looking for a range of 6%/5.95% – 6.40%-6.45% for the next couple of weeks.

Kshitij Consultancy Service
Kshitij Consultancy Servicehttp://www.kshitij.com
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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