GOOD MORNING!
FOREX
The US Treasury's liquidity-support buyback announcement triggered a sharp fall in long-term Treasury yields and the Dollar Index, boosting the rally in major currencies. DXY could test 98.50–98.00 before rebounding; EURUSD may rise to 1.17, GBPUSD to 1.37, and EURJPY to 186. USDCNY has plunged to 6.7207 and remains bearish towards 6.70, while EURINR trades above 111 and looks bullish towards 112.50 in line with our expectations. USDINR could fall from 95.75 on Dollar weakness, but higher crude prices may limit the downside.
Dollar Index (98.767) fell sharply on a decline in the 10Yr and 30Yr yields as the US Treasury announced that it will at least double its liquidity-support buybacks of longer-dated securities, raising purchases in the 10–30-year sector. A test of 98.50-98.00 in the coming sessions looks likely before a rebound sets in for the medium term.
EURUSD (1.1676) has risen sharply above 1.16 and is now headed towards 1.17, a break above which, if seen, will open up chances for a further rise to 1.18.
Dollar-Yen (158.52) tested 158.029 before moving up today in the morning session. If the spot holds above 158, it can trade steadily and attempt to rise slowly back towards 159+ levels soon. Only a break below 158, if seen, would be crucial and keep the near-term downtrend intact with downside targets of 157/156.
EURINR (111.6063) has risen in line with out expectation and can target 112.50 on the upside.
EURJPY (185.06) tested 183.927 but has recovered well from there. While above 185, view remains bullish for a rise towards 186.
USDCNY (6.7208) has plunged and resumed its decline faster than expected. Our target of 6.70 could be achieved much faster if the falling momentum continues.
Aussie (0.7114) has risen back above 0.71 and needs to sustain and break above 0.7130 to rise towards 0.72 on the upside. Otherwise, we may see rejection from current levels, and Aussie can fall back towards 0.70 in the next few sessions.
Pound (1.3613) has risen well and could have scope to test 1.37 in the near term.
USDINR (95.7430) could dip from 95.75 on a weak dollar index, but higher crude prices could keep the fall in check as crude currently has a high correlation with USDINR. A dip in the spot towards 95.50/30 could be expected if not more.
INTEREST RATES
The US Treasury Yields have come down sharply. The Treasury Department announcing that it will double its repurchase has dragged the yields. But on the charts, nothing much has changed. The broader bullish view is still intact. The 10Yr is coming down within its range. The 30Yr has support to limit the downside. The German Yields sustain higher and keep intact the broader bullish view. They have room to rise more. The 10Yr GoI remains stable. While it sustains above the immediate support, there are good chances to see some more rise. Thereafter the broader downtrend can resume.
The US 10Yr (4.64%) and 30Yr (5.18%) yields have come down sharply. The 10Yr is broadly in a range of 4.59%-4.75% and is coming down within it. We expect the range to hold. The 30Yr on the other hand can dip to 5.14%-5.13% and then rise back again. There is no major change in the overall bullish view.
The German 10Yr (3.26%) and 30Yr (3.76%) Yields remain higher and stable. There is room to see 3.3%-3.35% (10Yr) and 3.8% (30Yr) on the upside. The price action thereafter will need a close watch.
The 10Yr GoI (6.8170%) remains stable. While above 6.8%, the chances of seeing 6.9% or 6.95% will still remain alive. Thereafter we expect the downtrend to resume. Only a sustained rise above 6.95% will negate our bearish view of seeing 6.7%-6.6%.
STOCKS
Global equities remain mixed, with Dow and DAX continuing to face downside pressure towards 53000 and 26000 respectively. Nifty is holding above the key 24000 support and can bounce towards 24300-24350 in the coming weeks. Nikkei remains weak after testing 65170 and can decline further towards 64500-64000. Shanghai is hovering near 3900, with a sustained break below this level opening the way towards 3850-3800 and weakening the earlier bullish view towards 4000.
Dow (53549.63, +0.04%) can decline towards 53000 in the near term, while the broad range of 53000-55000 remains intact for some time.
DAX (26133.56, -0.19%) has declined in line with our expectations and can fall further towards 26000 in the coming sessions.
Nifty (24,078.30, -0.32%) tested a low of 24025 before closing higher yesterday. While the downside appears limited near 24000, it has scope to bounce back towards 24300-24350 in the coming weeks.
Nikkei (66035.71, -0.84%) tested a low of 65170 in line with our expectations and can decline further towards 64500-64000 in the near term.
Shanghai (3905.10, +0.30%) fell to a low of 3879 yesterday and is currently hovering above 3900. A sustained break below this level would drag the index further down towards 3850-3800, negating our earlier view of a rise towards 4000. We will have to wait and watch.
COMMODITIES
Brent and WTI likely to remain range-bound within $80-$95 and $75-$90 respectively until a breakout provides further direction. Gold has broken above $4500 and can rise towards $4600-$4650 while holding above $4200. Silver remains bullish and can advance towards $70-$75. Copper has bounced from the $6.35-$6.30 support zone and can rise towards $6.65-$6.75. Natural Gas remains positive and can move above $2.80 in the coming sessions.
Brent ($91.76) and WTI ($84.35) are likely to remain broadly range-bound between $80-$95 and $75-$90 respectively for some time. A break above the mentioned ranges would trigger further bullishness.
Gold ($4548.20) has risen above $4500 in line with our expectations and can rise further towards $4600-$4650 in the coming weeks while it holds above $4200.
Silver ($67.15) has risen in line with our view and can advance further towards $70-$75 in the near term.
Copper ($6.48) has bounced back from the support near $6.35-$6.30. A further rise towards $6.65-$6.75 can be seen.
Natural Gas ($2.7850) can move towards $2.80 and higher in the coming sessions.
DATA TODAY
1:30 07:00 Australia Labour Force
...Expected 11.7 K ...Previous 80.2 K ...Actual -15.3K
12:30 18:00 US Philifed Index
...Expected 24.3 ...Previous 41.4
DATA YESTERDAY:-
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UK CPI Y/Y
...Expeccted 2.9 % ...Previous 2.6 % ...Actual 2.8 % ...Kshitij Expn. 2.4 %
EU Final CPI (YoY)
...Expeccted 2.9 % ...Previous 2.9 % ...Actual 2.9%
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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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