GOOD MORNING!
FOREX
Concerns of continuation of the US-Iran conflict as stated by President Trump has led to a 100% chance of a Dec-rate hike of 50bps as per the CME Fedwatch tool. The DXY has risen above 103 and heads towards 104 now while the Euro trades below 1.11. A rise above 1.11 is needed in the near term to avoid further decline towards 1.10. Dollar-Yen has tested 160 but trades slightly lower today. Sustained dip from here can take it towards 159-158 in the coming days else a rise back towards 160-160.50 and beyond could still be seen. EURINR is likely to move up while above 104. USDCNY is bearish. The Aussie and Pound could rise in the near term while above 0.68 and 1.32 respectively. USDINR moved up to close above 94 yesterday and can hold to rise towards 94.20/30 in the near term.
Dollar Index (103.129) has moved up sharply, breaking above 103 as expected and could now be headed towards 104 from where a decent corrective dip looks possible.
EURUSD (1.1062) has moved up slightly after testing 1.1045 in line with our expectation of a dip to 1.1050-1.10. If an immediate bounce back towards 1.11 or higher is not seen, it can lead to a further decline in the medium term.
Dollar-Yen (159.87) has tested 160 before coming off slightly. Another test of 160-160.50 could be on the cards for the near term from where a rejection looks likely.
EURINR (104.0141) tested 103.6977 before bouncing back to above 104 now. It needs to sustain above 104 to slowly move higher else could be vulnerable for a further decline towards 103.
USDCNY (6.6668) continues to look bearish towards 6.65.
Aussie (0.6812) tested 0.6797 before bouncing higher from there. While the current rebound holds, it can attempt to rise back towards 0.6850-0.69 in the medium term, else can decline back sharply towards 0.67.
Pound (1.3237) tested 1.3221 before rebounding from there. While above 1.32, the spot can move up slowly.
USDINR (94.0330) moved up yesterday to close above 94. If the rebound holds, we may expect the spot to rise further today towards 94.20/30. Thereafter, we need to see if the pair again falls back towards sub-94 levels or moves ahead towards 94.50.
INTEREST RATES
The US Treasury Yields have risen sharply after oil prices start to move up following Trump’s comments that said a deal with Iran was not needed. The CME’s FedWatch tool now shows 100% odds of a Dec-rate hike of 50bps as the market sentiment may now shift to the fact that the Middle East tensions may not end so soon. The US 10YR and the 30YR trades higher and could inch up slowly in the near term while the crude prices move higher. The German and the 10Yr GOI Yields are also trading higher and look bullish for the near term.
The US 10Yr (5.127%) and 30Yr (5.454%) Yields have risen well and could move up to test 5.2% (10Yr) and 5.6% (30Yr) respectively.
The German 10Yr (3.3573%) and 30Yr (3.7058%) Yields have also moved up along with the rise in the US yields. The 10yr yield could move up towards 3.7% while the 30Yr could continue its rise towards 4%-4.1% in the coming days. Overall, the yields look bullish from here.
The 10Yr GoI (7.2467%) has scope to rise towards 7.30% in line with the rise in the US and German yields. Thereafter, a corrective dip can be possible towards 7.20%-7.10% in the medium term.
STOCKS
Global equities look vulnerable, with the Dow facing a decline towards 51,600 on a decisive move below 52,000 and the DAX towards 26,000 while below 27,000. Nifty needs to hold 25,000 to rise towards 25,800-26,000. Nikkei needs a sustained break above 62,000 to rise towards 64,000, else it risks a sharp decline towards 57,000. Shanghai needs to hold above 3,650 to rise towards 3,750, else it can slip towards 3,600.
Dow (52297.09, -0.36%) has tested the high of 52751 before closing lower. A decisive move below 52000 can drag the index towards 51600 over the coming week.
DAX (26771.88, +0.41%) has tested the high of 27000 as expected before closing sharply lower. While below 27000, it has scope to decline further towards 26000 over the next week.
Nifty (25299.35, +0.18%) may open lower today but needs to hold the 25000 support to rise higher towards 25800-26000 in the coming weeks.
Nikkei (61833.55, +1.66%) moved higher and needs a sustained break above 62000 to rise higher towards 64000 in the coming days. Else while below 62000, there remains a risk of a sharp decline towards 57000.
Shanghai (3653.83, -0.07%) needs to hold above 3650 to rise higher towards 3750 over the coming week. Else a sustained move below 3650 will drag the index towards 3600 and can delay the rise towards 3750.
COMMODITIES
Crude oil prices bounced back but remain vulnerable. Brent and WTI could decline toward 90–85 and 85–80, respectively, in the near term. Gold plunged below 3900, leaving it torn between breaking 3850 toward 3800–3700 or rebounding toward 4000–4100. Silver fell to key support at 50, where a breakdown risks dragging prices toward 48–45. Meanwhile, Copper dropped sharply and stays vulnerable toward 6.10–6.00, while Natural Gas faces immediate weekly resistance near 3.4 that could trigger a pullback toward 3.0 unless broken for a rally toward 3.6–3.8.
Brent ($95.95) and WTI ($88.46) have bounced back, though prices remain vulnerable and could decline towards 90–85 and 85–80, respectively, in the near term.
Gold ($3888.10) plunged and closed below 3900 yesterday in line with our expectations. It remains to be seen whether it breaks further below 3850 to extend the bearish momentum towards 3800–3700, or bounces back towards 4000–4100.
Silver ($50.19) has fallen to 50 in line with our expectations. A break below this support level would drag prices lower towards 48–45.
Copper ($6.22) fell sharply to a low of 6.14 contrary to our expectations before closing at 6.20 yesterday. It remains vulnerable to a further decline towards 6.10–6.00 in the coming sessions.
Natural Gas ($3.3530) has bounced back sharply. Immediate resistance is seen near the 3.4 region on the weekly chart; while this holds, prices could pull back towards 3.0. Alternatively, a break past 3.4 is needed to trigger a rise towards 3.6–3.8.
DATA TODAY
10:00 15:30 EU Trade Bal
...Expected -4.5 EUR Bln ...Previous -6.8 EURBLN -
10:00 15:30 EU Flash GDP
...Expected 0.4 % ...Previous 0.6 %
13:30 19:00 US PPI
...Kshitij Expn 0.5 % ...Expected 0.4 % ...Previous 0.0 %
13:30 19:00 US Core PPI
...Kshitij Expn 0.4 ...Expected 0.3 ...Previous0.7 -
DATA YESTERDAY:-
---------------
UK Trade Bal
...Expected -19.2 GBP(BLN) ...Previous -19.6 GBP(BLN) ...Actual -22.3 GBP(bln)
IN CPI
...Kshitij Expn 5.7 ...Expected 5.93 ... Previous 5.54 ...Actual6.09
US Existing Home Sales
...Kshitij Expn. 4069 K ...Expected 3890 K ...Previous 3970 K ...Actual3750K
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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