Morning briefing: Global equity indices face selling pressure

Vikram Murarka Kshitij Consultancy Services

The Dollar Index has support around 106 above which it is likely to move up towards 107 or even higher. The fall in Euro to 1.04 cannot be fully ruled out until a further rise past current levels is seen. The Aussie and Pound have supports around 0.6450-0.64 and 1.25 respectively which can be tested soon in the near term. USDCNY is holding well below the resistance 7.25/26 from where a rejection can be expected. The Dollar Yen is back within the 152-155 range, EURJPY tested 165 as expected on Friday before coming down. Both the pairs have scope to rise higher while the respective near-term supports hold. EURINR is bearish towards 88.50-88.00 while USDINR could remain flat near 84.40 for a few more sessions and attempt to move up towards 84.50 or higher in the next couple of weeks.

The fall in the US Treasury yields that we have been expecting is not happening. Need to watch for a day or two. A rise above the immediate resistance from here will negate the fall and in turn will take yields higher. The German yields are holding well above their support. Outlook is bullish and the yields can rise from here. The 10Yr GoI is coming up towards the upper end of the current range. Bias is positive to break the range on the upside and rise if not immediately but eventually.

Global equity indices face selling pressure. The Dow Jones has declined below 43500, reinforcing our bearish outlook with potential downside targets at 42000-41000. The DAX remains within the 19000-19600 range and is expected to consolidate within this band for some time. However, failure to see a strong rise could make it vulnerable to break below 19000 and head towards 18800/500. Nifty remained flat but while above immediate support at 23400, a bounce to 23800 is a possibility before resuming the fall to 23000. Nikkei fell below 38500 to a low of 38150 before seeing a recovery to the current level. Looking forward, while below 38500, it could extend the fall towards 38000-37700. Shanghai broke below 3400, contrary to our view of seeing a rise to 3500 and negating the rise towards 3500. Now it could be headed towards 3300-3250.

Crude prices have fallen to their immediate support levels. While the supports hold, a bounce back towards 74 (Brent) and 69 (WTI) can take place in the near term. Gold, Silver and Copper have seen some recovery. Gold needs to break above 2600 to see a rise towards 2650-2700, else can fall back to 2550-2500 while Silver and Copper are holding above their immediate support levels and can bounce back towards 31.0-31.5 and 4.2-4.3 respectively in the upcoming sessions. Natural Gas looks ranged between 3.0-2.6 while below 3.

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Author

Vikram Murarka

Kshitij Consultancy Services

Vikram has been forecasting, trading and hedging currencies since 1991. Beginning his career as a currency trader in Essar Group, he was managing an FX exposure of $1.2 bln.

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