GOOD MORNING!
FOREX
Escalation in the middle east tensions may continue to impact the forex markets as the US has refused to extend its MOU with Iran. The Dollar Index needs to sustain above 99.50 to prevent a decline to 99-98.50 again and instead rise to 100 and higher in the coming days which could keep Euro intact below 1.16. EURJPY is bullish towards 185/186 while above 184; USDJPY looks positive for a slow rise towards 160; USDCNY is likely to hold above 6.74 for sometime before resuming its downtrend. Aussie could attempt to rise while above 0.71 but it could be short lived as the spot would soon fall back towards 0.70 or lower. Pound can target 1.36/37 while above 1.35. EURINR will have to sustain a break above 111 to move up further. USDINR can be bullish along with the rising crude prices as correlation with the crude prices holds strong at the moment.
Dollar Index (99.574) tested 99.29 but could not sustain and has bounced back to levels above 99.50. It would be crucial for the index to sustain rise from here to show positive momentum towards 100 or higher to negate any downside chances of 99-98.50 coming into the picture.
EURUSD (1.1579) is tested 1.1614 before coming back sharply to levels below 1.16. The spot needs to sustain trade below 1.16 to eventually dip towards 1.15 else the currency can turn bullish towards 1.17/1.18.
Dollar-Yen (159.54) tested 158.84, slightly below our mentioned support at 158.90 before bouncing back to current level. While the pair sustains above 159, it could continue to see a slow rise towards 160-161 and negate chances of a dip towards 158.
EURINR (110.7914) seems to be slowly inching higher. A sustained break above 111 can turn bullish for the medium term.
EURJPY (184.69) has risen well above 184 and seems to be rising in a steady manner. It could soon target 185 and if it manages to sustain a break above that too, 186 would come into the picture in the medium term.
USDCNY (6.7424) tested 6.7382 yesterday before seeing a rise today to levels above 6.74. If the rise sustains for a few sessions above 6.74, we might have to allow for a corrective rise to 6.7460/7480 before the spot resumes its downtrend in the longer run.
Aussie (0.7104) tested 0.7129 before coming off to current levels. If the Aussie fails to sustain above 0.71, it could soon see a reversal back towards 0.70.
Pound (1.3543) can rise to 1.36/37 while above 1.35.
USDINR (95.6075) moved up yesterday contrary to our expectation of seeing some appreciation in the Rupee. With the crude prices rising and middle east tensions escalating, we may expect the USDINR too to rise towards 95.75-96 in the coming sessions
INTEREST RATES
The US Treasury Yields have risen sharply. The expected rise seems to be happening a little faster than expected. Need to see if we are getting a correction after this rise or an extended upmove. The German Yields are moving up as expected. The bullish view is intact, and the yields can rise more. The 10Yr GoI has risen back sharply. If this sustains, then the yields can rise more. Our bearish view will get negated only if the yield gets a sustained rise above 6.9%.
The US 10Yr (4.72%) and 30Yr (5.31%) yields are heading up towards 4.8% (10Yr) and 5.35%-5.4% (30Yr) a little faster than expected. Need to see if an intermediate correction is happening thereafter or the upmove is extending further.
The German 10Yr (3.22%) and 30Yr (3.74%) Yields have moved up further. The upside remains open to see see 3.3%-3.35% (10Yr) and 3.8% (30Yr). Support is at 3.1% (10Yr) and 3.6% (30Yr).
The 10Yr GoI (6.8071%) has risen back sharply. While this sustains, a test of 6.85% is possible. A rise above 6.9% if seen will negate the fall to 6.7% that we have been expecting. Need to wait and watch.
STOCKS
Global equities have weakened amid heightened tensions in the Middle East. Dow can decline towards 53000 while remaining within the broader 53000-55000 range, while DAX can fall further towards 26000. Nifty remains weak below 24300 and can decline towards 24100-24000, with a move above 24300 needed to revive the bullish outlook towards 24400-24500. Nikkei has fallen sharply but can retain its bullish bias towards 70000 while above 66000. Shanghai remains stronger above 3900 and can rise towards 4000-4050.
Dow (53521.67, -0.04%) is falling in line with our expectations due to heightened tensions in the Middle East and can decline towards 53000 in the near term, while the broad range of 53000-55000 remains intact for some time.
DAX (26321.79, -0.42%) saw a brief rise to 26583 but pulled back from there to close at 26433 yesterday amid renewed tensions between the US and Iran. A further decline towards 26000 can be seen in the coming sessions.
Nifty (24,287.65, -0.32%) tested a low of 24226 before closing higher. While it remains below 24300, the risk of a decline towards 24100-24000 remains open. It needs to move above 24300 to retain our earlier bullish view towards 24400-24500 in the coming weeks.
Nikkei (68075.16, -1.42%) is falling sharply due to the escalation in the Middle East. It needs to sustain above 66000 to retain the possibility of a rise towards our earlier mentioned level of 70000.
Shanghai (3961.28, -0.54%) rose above 3950 and tested a high of 3983 yesterday, contrary to our expectations. While above 3900, it can rise further towards 4000-4050.
COMMODITIES
Brent and WTI are moving higher but likely to remain range-bound within $80-$95 and $75-$90 respectively until a breakout provides further direction. Gold remains bullish above $4200 and can rise towards $4600 and higher on a break above $4500. Silver can advance towards $70-$75, while Copper is likely to consolidate within the $6.50-$6.75 range until a breakout. Natural Gas has recovered and can rise towards $2.75-$2.80 while holding above the key $2.60 support.
Brent ($91.06) and WTI ($84.09) are moving higher and 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 ($4451.50) is likely to break above $4500 and rise towards $4600 and higher in the coming weeks while it holds above $4200.
Silver ($65.39) can rise further towards $70-$75 in the near term.
Copper ($6.57) tested a high of $6.74 and closed lower at $6.62 yesterday. Immediate resistance is near $6.75, while support is near $6.50. The range of $6.50-$6.75 could hold for some time until a breakout on either side provides further directional cues.
Natural Gas ($2.70) has bounced back in line with our expectations, and while the support at $2.60 holds, a further rise towards $2.75-$2.80 can be seen later.
DATA TODAY
6:00 11:30 UK Unemp
...Expected 4.8 % ...Previous 4.9 %
12:30 18:00 US Housing Starts
...Kshitij Expn 1362 K ...Expected 1350 K ...Previous 1427 K
13:15 18:45 US Industrial Production
...Kshitij Expn. 0.2 % ...Expected 0.3 % ...Previous 0.0 %
13:15 18:45 US Capacity Utilization
...Kshitij Expn 76.0 % ...Expected 76.3 % ...Previous 76.1 %
DATA YESTERDAY:-
---------------
JP GDP
...Expected 0.5% ...Previous 0.5% ...Actual 0.3%
CN Retail Sales
...Expected 1.5 ...Previous 1.0 ...Actual 0.6
CN IIP (YoY)
...Expected 5.0 ...Previous 5.3 ...Actual 4.5
CA Inflation Y/Y
...Expected 2.5 % ...Previous 2.8 % ...Actual 3.0 %
US Tics
Actual 172.7 $bln Expected 151.4 $bln Previous 231.2 $bln
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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