GOOD MORNING!
FOREX
President Trump, yesterday, signalled that the Iran war would end soon and that the US would waive “some oil sanctions” to reduce soaring oil prices. This has lead to a reversal in the direction for all the currency pairs from what was seen yesterday morning. With the Dollar Index having fallen below 99 now, most other currencies have strengthened. Euro has rise back above 1.16, heading towards 1.1750 while EURINR is rising towards 107/108. EURJPY has moved up above 183 and could target 185 while USDJPY has dipped while resistance near 160 holds well. USDCNY has come down towards 6.90 and could test 6.88/85 again in the coming days. Aussie and Pound are back above 0.70 and 1.33 and are headed higher for the rest of the week. The USDINR may open with a gap down today, below 92, with a possible test of 91.80/50. The upside target of 92.50-93 is negated while below 92. On the NDF, it is currently quoting 91.80.
Dollar Index (98.791) tested 99.695 yesterday but has fallen sharply back to levels below 99 now. This decline was seen after Trump signalled that the Iran war would end soon. On the charts, while the index remains below 100, the scope for higher targets of 101-101.50 may not come into the picture. Instead, the index may decline towards 98-97. But in case of any escalation in the war scenario, the Dollar Index can again move up.
EURUSD (1.1625) has risen on fall in the Dollar Index below 99, contrary to our expectations. On the Euro, while above 1.15, a rise to 1.1735-1.1750 can be expected before another leg of downside is seen.
EURINR (106.8033) has moved up well from yesterday’s low of 105.7043. While immediate downside is limited to 105.50-105, the cross can rise back towards 107/108 soon, coming in line with our view mentioned last week.
EURJPY (183.21) has negated a near-term dip to 180 and has instead risen with the turnaround in most currency prices after Trump’s comment yesterday. While above 183, the cross pair can regain momentum towards 184/185.
Dollar-Yen (157.65) is also down from yesterday’s 158.90, and could soon test immediate support near 156. Thereafter a bounce back within the 156-160 range could be possible. Else the pair will have to break below 156 to head towards 154/152. Watch price action near 156.
USDCNY (6.9061) has also declined. The pair can re-attempt to test 6.88/85 if the dip continues.
Aussie (0.7063) and Pound (1.3428) are also back above 0.70 and 1.33, respectively and could regain rising momentum targeting 0.71/72 and 1.35/36 in the coming days.
USDINR (92.3325) traded above 92 yesterday after opening with a gap up at 92.1875. With the turnaround in currency prices and the Dollar Index, the Rupee may today open with a gap down below 92. Currently quoting 91.80 on the NDF, we may expect to see 91.80/91.50 on the charts this week.
INTEREST RATES
The US Treasury yields have come down sharply. The extended rise is not happening now and the yields can fall back to test their support. A sharp fall in the oil price from around $120 to $90 now has dragged the yields down. The CPI data release tomorrow will need a watch. The German yields remain higher and stable. There is room to rise further from here to test their resistance. The price action thereafter will need to watch to see what happens. The 10Yr GoI has come down sharply from its high on Monday. It can rise back again if it manages to sustain above its immediate support. Else it can fall back into its earlier range. We will have to wait and watch.
The US 10Yr (4.11%) and 30Yr (4.73%) Treasury yields have come down sharply from around 4.2% (10Yr) and 4.8% (30Yr). This can take them down to 4%-3.95% (10Yr) and 4.6% (30Yr) again. The extended rise is not happening now.
The German 10Yr (2.85%) and 30Yr (3.42%) yields remain higher but stable. That keeps alive the chances of seeing 2.9% (10Yr) and 3.5% (30Yr) on the upside. Need to see what happens after that.
The 10Yr GoI (6.7184%) spiked to a high of 6.7750% and has come down from there. If it manages to sustain above 6.68%, then a rise to 6.8% can happen from here. Else the yield can retain its earlier range of 6.64%-6.73%.
STOCKS
Global equities saw a recovery after sharp declines. Dow bouncing from 46333 to close higher at 47769, though while below 49000 the broader view still favors a fall towards 46000 or lower. DAX also rebounded from 22670 to 23413 after US policy reassurance, but while below 24000 the downside towards 22500-22000 remains possible. Nifty recovered from 23697.80 and closed at 24028.05 with key support near 24000, where a break can trigger a fall towards 23500-23000. Nikkei rebounded from 51200 to 54620 but remains vulnerable to a decline towards 50500-50000 while below 55000. Shanghai has bounced and may hold within the 4200-4050 range for some time.
Dow (47592, -0.37%) tested a low of 46333 and bounced back from there to close higher at 47769 yesterday. As long as it holds below 49000, our view remains intact for a fall towards 46000 or lower in the near term.
DAX (23618, +0.88%) fell to a low of 22670 but soon bounced back and closed higher at 23413 after the US announced policy reassurance. While it holds below 24000, our earlier mentioned fall towards 22500-22000 remains valid for now.
Nifty (24,028.05, -1.73%) has bounced back from the day’s low of 23697.80 and closed higher at 24028.05. Immediate support is seen near 24000 on the weekly candle chart. A sustained break below this level is required to trigger a further decline towards 23500-23000, otherwise a bounce towards 24500-25000 can be seen over the coming weeks.
Nikkei (54000, -1.14%) fell to a low of 51200 but soon bounced back and closed higher at 54620 yesterday. While it remains below 55000, it continues to stay vulnerable for a fall towards our earlier mentioned levels of 50500-50000.
Shanghai (4105, +0.23%) has bounced back and can sustain within the 4200-4050 range for some time.
COMMODITIES
Crude prices have surged sharply to highs near $119 after geopolitical tensions escalated following Israeli strikes on Iranian oil depots, but both prices reversed sharply after the US signaled removal of some oil sanctions to cool crude prices. While Brent holds above $80 it can bounce towards $95-$100, and WTI above $80 can rise towards $90-$95 in the near term. Gold remains bullish while above $5000 with potential to rise towards $5200-$5300. Silver has moved stronger than expected and can extend the rise towards $94-$96. Copper has bounced from $5.6395 and may remain within a $6.00-$5.60 range for some time until a breakout gives clearer direction. Natural Gas has corrected from $3.4950 but while holding above $3.00 it can attempt a bounce back towards $3.20-$3.50.
Brent ($90.24) surged sharply to a high of $119.50 yesterday after Israel reportedly bombed 30 Iranian oil depots on Saturday. However, it could not sustain the gains and reversed sharply to a low of $83.66 on the same day after US President Donald Trump on Tuesday said that he would remove some oil sanctions to help reduce the soaring crude prices. While it sustains above $80, a bounce back towards $95-$100 remains highly likely in the near term.
WTI ($86.03) as expected surged to test a high of $119.48 but fell back sharply to a low of $81.19 after the US announced partial removal of oil sanctions. While the price remains above $80, the chances of a bounce back towards $90-$95 remain higher in the near term.
Gold ($5,188.70) while holding above the support near $5000, our view of a rise towards $5200-$5300 remains intact for the near term.
Silver ($90.05) has risen beyond our earlier expectations and can move higher towards $94-$96 in the near term.
Copper ($5.9185) tested a low of $5.6395 and bounced back from there to close higher at $5.84 yesterday. A range of $6.00-$5.60 may hold for some time until a breakout on either side provides clearer directional cues.
Natural Gas ($3.11) has reversed from a high of $3.4950 and closed lower at $3.12 yesterday. While it holds above $3.00, a bounce back towards $3.20-$3.50 remains possible in the near term.
DATA TODAY
GMT 23:50 IST 05:20 JP GDP
...Expectations 0.3% ...Previous 0.1%
14:00 19:30 US Existing Home Sales
...Previous 4174 ...Expectations 3890 ...Previous 3910
DATA LAST FRIDAY
================
GMT 1:30 IST 07:00 CN CPI (YoY)
...Previous 0.2 ...Actual 1.3
GMT 1:30 IST 07:00 CN PPI
...Previous -1.4 ...Actual -0.9
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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