GOOD MORNING!
FOREX
The overnight change of events from threats of massive attacks on Iran to agreeing to suspend attacks on Iran for 2-weeks in exchange of opening of the Strait of Hormuz by the US has changed the near term direction for currency markets. The Dollar Index has weakened to levels below 99 leading to strength in most other currencies like the Yen, Aussie, Pound and the Euro which are now headed towards their respective near term upside targets of 158, 0.71/72, 1.35/36 and 1.17/1750 respectively. EURINR can dip back towards 107/106 while the fall sustains. USDCNY has declined and may test 6.80. The USDINR is likely to open with a gap down and trade lower today. We continue to see a test of 92.50/25 this month. RBI monetary policy is due today where the rates are likely to be kept unchanged.
Dollar Index (98.932) has dipped as Trump has agreed to suspend the bombing and attack of Iran for two weeks on condition that the Iran would open the Strait of Hormuz. While below 99, the index can test 98/97 before pausing.
EURUSD (1.1680) rallied sharply on Dollar weakness breaking above our range of 1.15-1.1650 mentioned yesterday. 1.17-1.1750 could limit the immediate upside in the next few sessions.
EURINR (107.9648) has dipped back and while 108 holds well, a further fall to 106/107 is possible.
EURJPY (185.04) may rise towards 186 while above 185. However thereafer we may expect a dip back towards 184/183.
Dollar-Yen (158.43) is likely to hold below resistance at 160/161 and we may see a dip back towards 158 soon.
USDCNY (6.8291) has declined below our expected 6.85 and is likely to fall further towards 6.80. A break below 6.80, if seen can open up further downside target of 6.75.
Aussie (0.7063) and Pound (1.3405) have both risen well from levels seen yesterday due to overnight weakness in the Dollar Index. If the rise continues we may soon see a test of 0.72 and 1.35/36 respectively.
USDINR (93.0175) closed just above 93 yesterday but has high chances of falling today on fresh dollar weakness, strength in the Euro and Chinese Yuan and the sharp fall in Brent prices. We keep a target of 92.50/25 this month. Also watch the RBI monetary policy today where the central bank is expected to keep rates unchanged.
INTEREST RATES
The US Treasury Yields have come down sharply following the two-week ceasefire announcement. So, the fall to test the support is happening much faster than anticipated. We expect the yields to rise back from their support. The German Yields have risen back sharply. A further rise from here will negate the corrective fall that we had expected. That in turn can take the yields higher straightaway. The 10Yr GoI is struggling to rise back. That keeps it vulnerable to see a dip in the near term before rising back again. The RBI monetary policy meeting today will need a close watch.
The US 10Yr (4.25%) and 30Yr (4.86%) Treasury yields have come down sharply. The fall to 4.2% (10Yr) and 4.8%-4.75% (30Yr) is happening much faster that expected. We expect the yields to bounce back thereafter and keep the broader uptrend intact to see 4.5%-4.6% (10Yr) and 5.05%-5.1% (30Yr) over the medium term.
The German 10Yr (3.08%) and 30Yr (3.54%) yields have risen back sharply. A follow-through rise from here can take them higher to 3.2% (10Yr) and 3.65% (30Yr) straightaway. In that case, the fall to 2.9%-2.85% (10Yr) and 3.4%-3.35% (30Yr) will not happen.
The 10Yr GoI (7.0458%) is struggling to rise back. That keeps the door open to see 7%-6.95%. As mentioned yesterday, a rise above 7.15% is needed to go up to 7.2%
STOCKS
Global equities have surged sharply after the ceasefire announcement. Dow has broken above 47000 and can rise towards 48500-49000, while DAX has seen a strong gap up and may move towards 25000-25200. Nifty is holding above 23000 and can extend gains towards 24500-24800 if it sustains above 24000. Nikkei has rallied strongly above 56000 and can rise further towards 57000-57500. Shanghai is also moving higher and may approach 4000-4050 in the near term.
Dow (47844, +2.21%) has broken sharply above 47000 after Trump announced a two week ceasefire with Iran. A further rise towards 48500-49000 can be seen in the coming weeks.
DAX (24208, +4.79%) has opened higher with a sharp gap up at 23988 following Trump’s ceasefire announcement. A further rise towards 25000-25200 can be seen in the near term.
Nifty (23,123.65, +0.68%) has risen to close above 23000 yesterday. Today it may open higher with a gap up near 24000 after the ceasefire announcement. If it opens above 24000, a further rise towards 24500-24800 can be seen in the coming sessions.
Nikkei (56270, +4.25%) has surged above 56000 earlier than expected after news of easing tensions in the Middle East. A further rise towards 57000-57500 can be seen in the near term.
Shanghai (3,962.27, +1.85%) has opened higher with a gap up at 3930 after the ceasefire announcement and can rise further towards 4000-4050 in the near term.
COMMODITIES
Crude prices have dropped sharply on ceasefire announcement and easing tensions. Brent can decline towards $90-$85 or even $80, while WTI may fall towards $90-$85 in the near term. In contrast, precious metals have strengthened with Gold rising above $4800 and likely to move towards $4900-$5000, while Silver can extend gains towards $80-$85. Copper remains positive and may move towards $5.80-$6.00. Natural Gas continues to weaken and can decline towards $2.7250-$2.70 in the coming sessions.
Brent ($95.66) has plunged by 12.46% after Trump announced a two week ceasefire. If the situation remains stable and de-escalates further, the price can drop towards $90-$85 or even $80 in the coming weeks.
WTI ($96.56) closed above $100 yesterday but has plunged by 14.51% today, testing a low of $91.05 so far after the ceasefire announcement. A further decline towards $90-$85 can be seen in the near term.
Gold ($4840.50) has moved above $4800 contrary to our expectations as tensions in the Middle East have eased. A further rise towards $4900-$5000 can be seen in the near term.
Silver ($76.60) has broken above $75 contrary to our expectations and can now move higher towards $80-$85 in the near term.
Copper ($5.7210) is moving up in line with our expectations and can head towards our earlier mentioned levels of $5.80-$6.00 in the coming sessions.
Natural Gas ($2.7510) continues to decline and can fall further towards $2.7250-$2.70 in the coming sessions.
DATA TODAY
GMT 4:30 IST 10:00 RBI Repo Rate
...Market 5.25 ...Previous 5.25
GMT 4:30 IST 10:00 RBI Rev Repo Rate
...Previous 3.35
GMT 4:30 IST 10:00 RBI MSF
...Previous 5.50
GMT 9:00 IST 14:30 EU Retail Sales
...Market -0.2 ...Previous -0.1
DATA YESTERDAY
===============
GMT 12:30 IST 18:00 US Durable Goods Orders
...Kshitij 0.5 ...Market -1.0 ...Previous 0.0 ...Actual
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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