GOOD MORNING!
FOREX
The Dollar Index rose sharply on Friday after the much higher than expected US NFP data release, now raising the chances of a rate hike in Dec by 25bps. The index remains bullish above 102, with 103–104 in view, while EURUSD may trade within 1.11–1.1250, with a break below 1.11 opening the way to 1.10. Most other currency pairs remain broadly ranged. Dollar-Yen can trade within 159-157/156, while EURJPY may consolidate within 176–178. EURINR looks bearish towards 102 unless it recovers above 106, while USDCNY may hold within 6.66–6.69. The Aussie remains vulnerable unless it sustains a recovery above 0.69; the Pound could rebound while support near 1.33 holds. USDINR remains bearish below 94.50 following its close at 93.90 on Friday on a sharp decline in crude prices. Unless a sharp rebound is seen above 94.50, the view remains bearish.
Dollar Index (102.15) rose sharply on Friday after a much higher US NFP data release that has increased the chances of rate hike by the Fed in Dec-26 by at least 25bps. The index had bounced from 101.50 to test 102.36, slightly higher than our expected 102.10. While the index holds above 102, view is bullish for an eventual rise towards 103-104 in the coming weeks. For now, a broad range of 101.50-102.50 can hold.
EURUSD (1.1155) had declined to 1.1131 on Friday but has bounced back slightly today. Overall, a broad range of 1.11-1.1250 can hold for the near term. Any break below 1.11, if seen, can extend the downside limit to 1.10.
Dollar-Yen (158.22) has been fluctuating within the 159-157/156 region and can continue to do so for the near term unless a decisive breakout is seen on either side of the range while the EURJPY (176.51) declined sharply to 176.16 before trying to move up from there. The cross pair can trade within a broad range of 176-178 for the near term.
EURINR (104.7995) has clearly broken below 106 and declined sharply. Unless a sharp recovery is seen above 106 again, the cross looks bearish for a fall to 102 in the medium term.
USDCNY (6.6743) is likely to have entered into a range trade like other currency pairs and may hold within the 6.69-6.66 region for the near term.
Aussie (0.6894) broke below the crucial support at 0.69 to test 0.68544 but seems to have bounced back well today. Unless a steady rise back above 0.69 is not established, Aussie could remain weak in the medium term. Pound (1.3372) fell sharply from 1.346 to 1.3342 on Friday but while above support near 1.33, Pound may regain its upward pace in the next few sessions.
USDINR (93.90) broke crucial support at 94.50, closing at 93.90 on Friday. Sharply lower crude prices and a rise in Indian equities have supported the Rupee well. The view is bearish below 94.50.
INTEREST RATES
The US Treasury and the German Yields are holding well above their support as expected. The Treasury Yields have bounced back well and can go higher from here. The German Yield on the other hand seems to lack strength. They need a strong follow-through rise from here to go up. We will have to wait and watch. The 10Yr GoI is holding higher but will have to rise past the immediate resistance. Only then it can go up and get some relief. Else, more fall can be seen from here.
The US 10Yr (4.87%) and 30Yr (5.27%) Yields are holding well above 4.8% (10Yr) and 5.2% (30Yr) and are bouncing back. That keeps intact our view of seeing a rise back to 5% (10Yr) and 5.4% (30Yr) first and then to 5.15%-5.2% (10Yr) and 5.4% (30Yr) eventually over the medium term.
The German 10Yr (3.25%) and 30Yr (3.63%) Yields are holding above 3.2% (10Yr) and 3.6% (30Yr) as expected after testing them. While this support holds, we expect the yields to rise back to 3.7% (10Yr) and 4%-4.1% (30Yr) over the medium term. We will have to wait and see.
The 10Yr GoI (7.1898%) is holding higher. However, it will need a sustained rise above 7.2% to go up to 7.3% and get some relief. Else a fall to 7% cannot be avoided. We will have to wait and watch.
STOCKS
Global equities remain under pressure, with the Dow and DAX weak and downside towards 50800 and 25200-25000. Nifty is holding near 25000 and needs to sustain above it to rise towards 25800-26000. Nikkei remains weak below 62250-62000, with scope to decline towards 52000-50000. Shanghai holds above 3600 and can rise towards 3750.
Dow (51285.73, -0.43%) had a gap-down opening on Friday and moved higher to test the high of 51662 before closing lower. There is room for a further decline towards 50800. A decisive break below this level would drag the index towards 50400-50300 in the medium term.
DAX (25820.36, -1.92%) had a gap-down opening below 26000 on Friday and attempted to move higher but failed to sustain above this level. It tested the low of 25617 before closing higher. While it stays below 26000, there is enough room to fall further towards 25200-25000 in the coming week.
Nifty (24986.40, -0.18%) closed below 25000 yesterday on Muhurat trading. It may open flat today and needs to move above 25000 and sustain for a further rise towards 25800-26000 in the coming weeks.
Nikkei (58346.77, +1.56%) has opened higher today. As mentioned earlier, while it stays below 62250-62000, the index looks weak and has scope to decline further towards 52000-50000 over the week.
Shanghai (3649.18, -1.10%) had a gap-down opening on Friday but held well above 3600 and moved higher to close at the current level. As mentioned before, it has scope to rise higher towards 3750 over the week while it holds above 3600.
COMMODITIES
Crude oil prices remain weak. Brent and WTI stay skewed toward declines near 90–85 and 85–80 while capped below 105 and 95, respectively. In precious metals, Gold advances in line with expectations above 4000 toward potential targets of 4200–4250, while Silver has bounced as anticipated with upside potential targeting 55–56. Meanwhile, Copper rebounded above 6.3 after holding critical support near 6.2, opening the door for gains toward 6.45–6.50, and Natural Gas pushes toward the upper bound of its 2.7–3.2 range near 3.2.
Brent ($97.73) and WTI ($90.68) are trading below 105 and 95, respectively, the overall direction remains skewed toward a decline toward 90–85 for Brent and 85–80 for WTI in the near term.
Gold ($4135.90) is moving up in line with expectations and remains to be seen whether it can extend gains toward 4200–4250 while holding above 4000.
Silver ($53.51) has bounced back in line with our expectations and can rise further toward 55–56 in the near term.
Copper ($6.33) the support has held well as we had discussed in our last analysis and bounce back above 6.3. while this support near 6.2 holds, a further rise to 6.45-6.50 can be seen.
Natural Gas ($3.0120) continues to move up and could soon test 3.2, keeping the previously mentioned 2.7–3.2 trading range intact for now.
DATA TODAY
1:30 07:00 CN CPI (YoY)
...Kshitij Expn. 0.0 ...Expected0.8 ...Previous 0.0
1:30 07:00 CN PPI
...Expected 5.3 ...Previous5.0
FFRIDAY'S DATA:-
---------------
EU Retail Sales
...Kshitij Expn. -0.23 % ...Expected -0.10% ...Previous 0.38 %...Actual -0.67 %
US NFP
...Kshitij Expn. 66.8K ...Expected 63.0 K ...Previous 60.0 K ...Actual 165.0 K
US Unemployment Rate
...Expected 4.2 % ...Previous 4.2 % ...Actual 4.1 %
US Avg Hrly Earnings
...Kshitij Expn. 0.20 ...Expected0.30 ...Previous0.26 ...Actual0.13
US Average Hourly Earnings Production & Non Supervisory Employees
...Kshitij Expn 0.1 ...Previous 0.2 ...Acctual 0.37
CA Labour Force
...Expected 14.5K ... Previous-68.3 ...Actual -4.7K
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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