GOOD MORNING!
FOREX
Surge in crude prices yesterday led to a sharp rise in yields, leading to a stronger US Dollar, but crude prices have dipped today, giving a relief correction on the Dollar Index, thus giving the other currencies some scope for appreciation against the US Dollar. Euro holds above 1.12, while USDJPY and EURJPY can test 157 and 186 respectively before rebounding from there. EURINR looks bullish to 109-109.50, while USDCNY can continue to fall towards 6.69. USDINR can have scope to test 96.50 before rising back towards 97.
EURUSD (1.1221) tested 1.1172 yesterday before rebounding from there to current levels above 1.12 as European yields have dipped from the recent highs and seem to be in a short-term correction. This has led to a pullback in the Dollar Index (102.038) from yesterday’s high of 102.467. It could test 101.80/101.60 before again rebounding to higher levels.
Dollar-Yen (157.85) could have some scope to test 157 while below 159. Thereafter, a break on ether side of the range would give more clarity on the medium-term movement.
EURJPY (177.17) seems to have bounced, and while above 176, the pair can attempt to test 178. Near-term range is 178-176, a breakout on either side would give more clarity on the medium-term view.
EURINR (108.6974) has been rising well and looks bullish for a further rise towards 109-109.50, if the rising momentum continues.
USDCNY (6.7016) has scope to decline towards 6.70/69 in the medium term.
Aussie (0.6972) has risen back well from 0.6932 seen yesterday. It could test 0.6980-0.70 before again seeing some correction.
Pound (1.3242) tested 1.31843 yesterday but has bounced back along with other major currencies against the Dollar. While above 1.32, view is bullish for the Pound.
USDINR (96.78) has dipped from 96.86 but we may expect the correction to limit itself to 96.50 before again rebounding back towards 97.
INTEREST RATES
The US Treasury Yields have come down sharply. They can fall further from here. However, support is there to limit the downside. We expect the Yields to resume their broader uptrend after testing their support. The German Yields have inched up slightly. But they can still fall back and test their support first before resuming their broader uptrend. The 10Yr GoI continues to move up. The outlook remains bullish, and there is room to rise more. However, intermediate corrections cannot be ruled out.
The US 10Yr (5.24%) and 30Yr (5.61%) yields have come down sharply. They can test their support at 5.15%-5.1% (10Yr) and 5.55%-5.5% (30Yr). Thereafter the broader upmove can resume targeting 5.35%-5.4% (10Yr) and 5.7%-5.75% (30Yr) and higher levels eventually.
The German 10Yr (3.49%) and 30Yr (3.86%) Yields have inched up slightly. But the downside is still open to see 3.35% (10Yr) and 3.75% (3Yr) before the upmove resumes to target 3.7% (10Yr) and 4%-4.1% (30Yr).
The 10Yr GoI (7.2868%) touched a high of 7.2965%. The broader picture is bullish to see 7.5% on the upside eventually. However, a corrective dip from 7.3% to 7.2% is a possibility before that rise happens. Strong support is in the 7.15%-7.1% region.
STOCKS
Dow and DAX remain weak below 51500 and 25000, with downside towards 50500-50000 and 24600-24500. Nifty remains near crucial support at 22200-22300, with a break below this zone opening downside towards 21700-21600. Nikkei remains weak below 68000 and can decline towards 67500-67000. Shanghai remains weak below 3800 and can fall towards 3700.
Dow (51237.11, +0.10%) has recovered slightly after testing the low of 50944. While the rise remains capped near 51500, the view remains bearish towards 50500-50000 over the coming week.
DAX (24806.97, -1.18%) has fallen towards 24800 as expected. While it stays below 25000, it remains weak and has scope to fall further towards 24600-24500 over the coming week.
Nifty (22,603.05, -0.76%) has fallen sharply toward 22,200 as expected and tested the low of 22,179 before closing above 22,200. It remains in the crucial support zone of 22,200-22,300. A sustained break below this zone opens the path toward 21,700-21,600, from where buying interest is expected to emerge and support a gradual recovery.
Nikkei (68571.74, -0.668%) has tested the low of 68150 as expected before inching higher. If it falls below 68000, it can drag the index further down towards a crucial support region of 67500-67000 in the coming session.
Shanghai (3785.55, -0.71%) failed to sustain above 3800 and has slipped below it. A sustained move below 3800 can pull it down towards 3700 over the coming week.
COMMODITIES
Brent and WTI remain bullish, with potential upside towards $105-$110 and $95-$100, respectively, amid escalating US-Iran tensions and rising freight costs. Gold could rise towards $4300-$4400 if support holds, while a break below $4100 could trigger a fall towards $4000 or lower. Silver needs to sustain above $60 to target $63-$65; otherwise, further downside is likely. Copper could rise towards $6.80-$6.85 while holding above $6.50. Natural gas may test $3.00, where its ability to hold or break lower will determine the next direction.
Brent ($103.54) and WTI ($91.02) rose on signs of a possible escalation in the US-Iran conflict. Surging freight costs for shipping crude oil out of the Middle East, which have reached record highs, are also supporting prices. As long as the respective support levels hold, we retain our view of a rise towards $105-$110 and $95-$100, respectively, in the near term.
Gold ($4196.30) has recovered somewhat and needs to sustain above the mentioned support level to rise towards $4300-$4400. However, a break below $4100 could extend the decline towards $4000 or lower.
Silver ($60.35) needs to sustain above $60 to keep alive the possibility of a rise towards $63-$65. However, a break below $60 would trigger further bearishness.
Copper ($6.64) pulled back sharply from a high of $6.76 and closed near $6.57 yesterday. It has since recovered above $6.60 and could rise towards the mentioned levels of $6.80-$6.85 in the near term, as long as it holds above $6.50.
Natural Gas ($3.1360) fell from a 1.5-week high on Thursday and settled lower after weekly natural gas storage rose more than expected, triggering long liquidation in natural gas futures. Prices could test $3.00 in the near term. Thereafter, it remains to be seen whether prices hold above this level and rebound or break below it, extending the decline.
DATA TODAY
12:30 18:00 CA Labour Force
...Expected 9.0k ...Previous -41.7 k
DATA YESTERDAY:-
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No major data release yesterday.
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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