HomeContributorsTechnical AnalysisMarket Morning Briefing: Weakness In The Dollar Index

Market Morning Briefing: Weakness In The Dollar Index

STOCKS

Dow (23526.18, -0.27%) was closed yesterday. As mentioned yesterday, some chances of testing 23750-23800 is possible in the near term. Trade within 23400-23800 is likely to continue.

Dax (13008.55, -0.05%) tested an intra-day low of 12921 yesterday before again bouncing back to close above 13000. While 13000 holds, some sideways movement within 13200-12900 is possible. In case the 12900 levels break, it would open up chances of testing lower levels of 12800-12700 in the medium term.

Nikkei (22446.13, -0.34%) is likely to move down while the 3-day resistance near 23000 holds. But a sharp rejection is not seen on the index yet. Looking at Dollar Yen (111.32), in case the currency pair moves lower to 111 and below in the coming sessions, it could lead to some fall in Nikkei too. Overall a sharp corrective dip is preferred in Nikkei so that it could get more room for an upmove in the longer run. Else the index could continue to range sideways without an immediate directional clarity.

Shanghai (3342.77, -0.27%) is trading at support near 3340 visible on the daily candles. A bounce from here would be expected towards 3380 and higher in the near term. Only on a failure to sustain above 3340, we may expect a fall to 3300. In the longer term, resistance near 3450 looks strong and has the potential to move the index to further downside.

Nifty (10348.75, +0.06%) is trapped in the 10300-10400 region since the last 3-sessions. Maximum downside for the near term is likely to be limited at 10200 while scope for a test of 10500 remains on the cards for the near term.

COMMODITIES

Gold (1292.28) and Silver (17.13) are both trading near previous levels and look stable just now.No major movement expected today. Gold could test 1300 and come back to 1285/80 while Silver may remain range-bound within 17.30-16.90.

Brent (63.38) and WTI (58.48) look bullish in the near term. Note resistance near 59 on WTI while Brent could move up to 65. In case 59 holds on WTI, a small corrective dip is possible in the coming week.

Copper (3.1505) is slowly moving up towards our mentioned target of 3.25 in the coming sessions. Near term looks bullish.

FOREX

Weakness in the Dollar Index (93.133) has persisted with the index trading just around the 93 level reached yesterday. This is in spite of some recovery in the US yields (see Interest Rates below). It could however test support near 92.60 in the next 2-3 sessions, from where a bounce is then likely.

Euro (1.1852) has moved up slightly with likelihood of testing resistance at 1.19 on the monthly charts in the coming week. However, with a slight recovery of US 10 yr yields and expected bounce in the Dollar Index soon, the resistance might hold, initiating a corrective dip back towards 1.175-1.180.

Dollar-Yen (111.34) looks set to reflect near term Dollar weakness with a test of support at 110 on the weekly candle chart. A rise in Japanese 10 yr yields (See Interest Rates below) is expected to support this bout of Yen strength in the next few sessions.

Pound (1.3297) after having moved beyond earlier resistance at 1.33, fell slightly, but with Dollar weakness expected in the near term, it is likely to test resistance at 1.135 in the daily charts soon. A breach past that and move towards resistance at 1.135 on the 3-day chart could happen with sustained bullishness.

Dollar Rupee (64.59) closed near our mentioned support at 64.60. If the currency pair does not bounce back from here today, we could see a test of 64.40 in the coming week. Also, there is some talks of a rating upgrade by S&P for India which if seen could lead to further strength in Rupee in the near term.

INTEREST RATES

While US yields have been coming down for the last few days, there is Support near current levels on the US 30Yr (2.75%) and on the 5Yr (2.06%). The 10Yr (2.33%) has Support lower down near 2.25%.

Perhaps the market is looking in the rear-view mirror instead of the rise in Brent (63.37) going ahead. Let us see if US yields pick up from here.

German yields have dipped a bit. The 2Yr (-0.71%) has strong long-term Resistance near current levels. Similarly, the Japanese 10Yr (0.03%) has an important/ strong Resistance near current levels. It will be interesting to see if they come down sharply from here. Looking at these, the US Dollar still has an overall interest rate advantage.

Looking at the US Yield Curve, the 30-5 yr Spread (0.69%) could have channel Support coming up soon, suggesting chances of a pick up in the US 30Yr (2.75%), as mentioned above as well.

In India, the 10Yr GOI (6.9861%) moved up a bit from 6.9585% earlier. There is market talk that S&P may also upgrade India’s rating soon.

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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