GOOD MORNING!
FOREX
After the higher US CPI release, traders now fully price in a December rate hike, with an 87.1% chance of a 25bps increase and a 12.9% chance of a larger 50 bps move, according to the CME FedWatch Tool. This has kept the Dollar Index higher and led the Euro to decline below 1.11. While the direction holds, the DXY can head towards 103/104 while Euro can fall towards 1.1050/1.10. Dollar-Yen needs a breakout above 160-160.50 and beyond, to move further upwards while EURINR has scope to decline further towards 102 on a break below 104. USDCNY is bearish. The Aussie and Pound too look to decline towards 0.68 and 1.32 while the USDINR could hold within 93.50-94.00 for a few sessions.
Dollar Index (102.84) is headed upwards. A break above 103 will pave way for 104 in the near term. But we may expect some rejection thereafter back towards 102.
EURUSD (1.1096) has fallen below 1.11 and if sustains, can drag itself down towards 1.1050-1.10 in the near term.
Dollar-Yen (159.59) has broken above 159 in line with our expectation mentioned yesterday. The spot is now headed towards 160-160.50 from where a rejection looks likely. A break above 160.50, if seen can signal medium term bullishness towards 162.
EURINR (104.0420) has broken lower on a decline in Euro as well along with the decline in USDINR seen yesterday. A break below 104, if seen can drag it lower towards 103/102 in the coming days. Overall view is bearish while below 104.
USDCNY (6.6666) has declined from 6.6770 seen yesterday. Near tern looks bearish towards 6.65.
Aussie (0.6845) is bearish while below 0.69 and can decline towards 0.68-0.67 in the coming days.
Pound (1.3278) has broken below 1.33 and while it trades lower, it can test 1.32 before a rebound is seen from there.
USDINR (93.68) tested 93.63 yesterday sustaining trade below 94. It would be crucial to see if it can trade within the 93.50-94.00 region for a few more sessions and the eventually head lower towards 93 instead of rebounding back towards 94+ levels.
INTEREST RATES
The US Treasury Yields seems to be struggling to get a strong follow-through rise. They have to get a sustained rise above their immediate resistance in order to go higher. Else they can fall back again. The German Yields are holding higher. While they sustain above their support, the bias is bullish to see more rise in the coming days. The 10Yr GoI is attempting to bounce back again. If this sustains, a corrective bounce is possible before the fall resumes.
The US 10Yr (4.99%) and 30Yr (5.33%) Yields have come-off from their highs of 5.02% and 5.38% respectively. A sustained rise above 5.05% (10Yr) and 5.4% (30Yr) is needed to go up to 5.15%-5.2% (10Yr) and 5.6% (30Yr). Else the yields can fall back to 4.93%-4.9% (10Yr) and 5.25% (30Yr)
The German 10Yr (3.31%) and 30Yr (3.67%) Yields are holding higher. While above 3.2% (10Yr) and 3.6% (30Yr) bias is bullish to see a rise to 3.7% (10Yr) and 4%-4.1% (30Yr.
The 10Yr GoI (7.2139%) has moved back up. The immediate picture is slightly unclear. A corrective bounce to 7.25%-7.3% is a possibility before the yield falls to 7.1%-7%. We will have to wait and watch.
STOCKS
Global equities remain firm, with the Dow and DAX holding above 52,000 and 26,000 and upside towards 52,800 and 27,000. Nifty needs to hold above 25,000 to rise towards 25,800-26,000. Nikkei needs a sustained move above 62,000 to negate the expected decline and open the path towards 64,000. Shanghai is holding above 3,600 and can extend the rise towards 3,750.
Dow (52486.49, +0.49%) moved higher to test the high of 52512 so far before closing, in line with our view. While it holds above 52000, further rise can extend towards 52800 in the coming session.
DAX (26662.77, +1.20%) has inched higher after testing the low of 26491. It needs to hold above 26000 to rise higher towards 27000 in the coming weeks.
Nifty (25255.05, +0.84%) may open flat today. It has tested the high of 25424 so far before closing. It needs to hold above 25000 to rise higher towards 25800-26000 in the coming weeks.
Nikkei (61409.59, +0.28%) needs a sustained move above 62000 to negate the expected decline towards 52000-50000 and open the path higher towards 64000 in the coming week.
Shanghai (3680.64, +0.46%) is holding well above 3600. Immediate support from the 13-day MA near 3658 remains intact. While this level holds, further rise can extend towards our expected target of 3750 over the coming week.
COMMODITIES
Crude oil prices remain vulnerable to further near-term declines. Brent and WTI target 90–85 and 85–80, respectively. Gold broke below 4000 and looks weak toward 3950–3900. Silver continues its slide toward 50 support, risking deeper losses to 48–45. Meanwhile, Copper relies on 6.2 support for a bounce toward 6.45–6.50, while Natural Gas faces resistance near 3.4 that could push prices back toward 3.0.
Brent ($92.02) and WTI ($85.94) remain vulnerable and could decline further towards 90–85 and 85–80, respectively, in the near term.
Gold ($3981.50) has fallen below 4000 and could decline further towards 3950–3900 in the coming sessions.
Silver ($51.40) is falling in line with our expectations and could decline further towards 50. A break below this support level would drag prices lower towards 48–45, which requires close monitoring.
Copper ($6.24) has pulled back, though a bounce towards 6.45–6.50 remains likely as long as support near 6.2 holds.
Natural Gas ($3.2840) surged to test a high of 3.3970 yesterday in line with expectations, but failed to sustain the gains and pulled back sharply to close at 3.21. Immediate resistance is seen near the 3.4 region on the weekly chart; while this holds, prices could decline further towards 3.0. Alternatively, a break past 3.4 is needed to trigger a rise towards 3.6–3.8.
DATA TODAY
7:00 12:30 UK Trade Bal
...Expected -19.2 GBP(BLN) ...Previous -18.0 GBP(BLN)
10:30 16:00 IN CPI
...Kshitij Expn 5.7 ...Expected 5.9 ... Previous 5.5
15:00 20:30 US Existing Home Sales
...Kshitij Expn. 4069 K ...Expected 3860 K ...Previous 3990 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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