GOOD MORNING!
FOREX
Dollar weakness continues to drive currency movements today. Dollar Index remains bearish toward 98.50–98.00, supporting upside in EURUSD, Aussie and Pound, while Dollar-Yen may stay capped below 160. EURINR and EURJPY look bullish toward higher targets while USDCNY remains weak heading towards 6.70. USDINR is likely to stay range-bound below 95.75 as higher crude prices offset rupee gains supported by a weak Dollar.
Dollar Index (98.75) continues to look bearish towards 98.50-98.00, while EURUSD (1.1692) tested 1.1710 yesterday and if we see a sustained trade above 1.17, the currency may attempt to rise further towards 1.18 or higher.
160 could hold as an immediate upside level for the Dollar-Yen (158.95) below which it can fall again towards the 158.50-158 region. A decisive break above 160 will be needed for the Yen to move towards 161 or beyond.
EURINR (111.6063) is headed towards 112.50, a break above which, if seen, will open up chances of a further rally towards 114/115.
EURJPY (185.81) has risen well above 185 and could soon head towards 186-188 region.
USDCNY (6.7225) looks bearish towards 6.70 in the coming days.
Aussie (0.7131) and Pound (1.3642) are bullish towards 0.72-0.7250 and 1.37-1.38, respectively.
USDINR (95.6950) is likely to remain stable in a narrow range below 95.75 today. While a weaker US Dollar supports the Rupee, higher crude prices could limit its gains and keep it range-bound.
INTEREST RATES
The US Treasury Yields have risen back sharply. That keeps intact our overall bullish view. The 10Yr Treasury yield is range bound now. We expect it to make a bullish breakout and rise going forward. The German Yields continue to sustain higher but are stable. They have room to move further up from here. The 10Yr GoI has risen sharply. It can rise further from here before resuming its broader downtrend.
The US 10Yr (4.70%) and 30Yr (5.25%) yields have risen back sharply. The 10Yr oscillates within its 4.59%-4.75% range. We expect a bullish breakout of this range and a rise to 4.8% and higher. The 30Yr can rise to 5.4% while it remains above the 5.15%-5.1% support zone.
The German 10Yr (3.26%) and 30Yr (3.76%) Yields continues to remain stable and higher. The upside remains open to see 3.3%-3.35% (10Yr) and 3.8% (30Yr) on the upside. Need to see if a corrective fall is happening thereafter or not.
The 10Yr GoI (6.8709%) has risen sharply. The rise to 6.9%-6.95% can happen first. Thereafter the downtrend can resume targeting 6.7%-6.6%.
STOCKS
Dow is under pressure from rising Treasury yields and weak Walmart earnings, and a break below 52800 could open the way towards 52000. DAX remains weak below 26000 and can decline towards 25750-25500. Nifty continues to strengthen above 24200 and can rise towards 24300-24350. Nikkei remains vulnerable to a decline towards 64500-64000, while Shanghai is hovering near 3900 and could fall towards 3850-3800 on a sustained break below this level.
Dow (52853.67, +0.01%) plunged to a low of 52812 yesterday due to rising Treasury bond yields and a sharp decline in Walmart shares following weak earnings, which raised concerns over higher borrowing costs. Channel support is seen near 52800. It remains to be seen whether this support holds and triggers a bounce back, or breaks further below and extends the bearishness towards 52000.
DAX (26051.72, -0.04%) fell to a low of 25965 yesterday, in line with our expectations. A sustained break below 26000 would trigger a further decline towards 25750-25500.
Nifty (24,231.85, +0.61%) closed above 24200 yesterday and can extend its rise towards 24300-24350 over the coming weeks.
Nikkei (65985.17, +0.59%) remains vulnerable to a decline towards 64500-64000 in the near term.
Shanghai (3907.70, +0.10%) is hovering above 3900. A sustained break below this level would drag the index further down towards 3850-3800, negating our earlier view of a rise towards 4000. We will have to wait and watch.
COMMODITIES
Brent and WTI are likely to remain range-bound within $80-$95 and $75-$90 respectively until a breakout provides further direction. Gold remains bullish above $4200 and can rise towards $4600-$4650, while Silver can advance towards $70-$75. Copper continues to strengthen in line with expectations and can rise towards $6.65-$6.75. Natural Gas remains positive and can move towards $2.80 and higher in the coming sessions.
Brent ($93.79) and WTI ($86.77) have moved higher but are likely to remain broadly range-bound between $80-$95 and $75-$90 respectively for some time. A break above the mentioned ranges would trigger further bullishness.
Gold ($4574.90) has seen a dip but can rise towards $4600-$4650 in the coming weeks while it holds above $4200.
Silver ($68.42) can rise further towards $70-$75 in the near term.
Copper ($6.52) is moving higher in line with our expectations and can rise towards $6.65-$6.75.
Natural Gas ($2.7650) can move towards $2.80 and higher in the coming sessions.
DATA TODAY
23:05 04:35 UK Cons Conf
...Previous -17.0 ...Expected -18.0 ...Actual-14.0
23:30 05:00 JP CPI
...Previous 1.6 ...Expected 1.8 ...Actual 1.8
5:00 10:30 IN Flash Manufacturing PMI
...Expected 53.9 ...Previous 53.5
5:00 10:30 IN Flash Services PMI
...Previous 53.3
8:00 13:30 EU Flash PMI
...Previous 51.9 ...Expected 51.8
8:30 14:00 UK Flash PMI
...Previous 51.9 ...Expected 51.6
DATA YESTERDAY:-
---------------
Australia Labour Force
...Expected 11.4 K ...Previous 76.3 K ...Actual -15.9K
US Philifed Index
...Expected 24.1 ...Previous41.4 ...Actual 47.4 -
DISCLAIMER
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 responsible 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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