GOOD MORNING!
FOREX
Fresh demand for the dollar ahead of the US CPI data release today has led to a decline in other major currencies against the US Dollar. Aussie, Pound, Chinese Yuan, Indian Rupee and the Euro see near-term weakness against the Dollar, while EURINR is rising towards 112. USDJPY and EURJPY have risen, but the rise could be temporary, and the two pairs could start declining again in the medium term. USDINR, while above 95.50, could aim to test 96.0-96.50 on the upside.
EURUSD (1.1607) fell sharply after the ECB hiked rates by 25bps, contrary to our expectations of seeing a rise. A break below 1.16, if seen and sustained would open up chances of a further sip to 1.1550-1.1500. An immediate bounce back from 1.16 or slightly lower can still hold the near-term uptrend for the Euro.
Dollar Index (99.11) has risen, contrary to expectations. We may expect a near-term trade within the 98.50-99.50 region unless a clear breakout is seen on either side.
Dollar-Yen (154.48) has risen but could see limited rise to 155.30, from where a dip back towards 153-152 looks likely. Our lower targets of 150-148 would only come into the picture on a decisive break below 152. EURJPY (179.28) has also recovered but could limit its rise to 180.25-180.50 in the next few sessions before we see another dip.
EURINR (111.0564) looks bullish towards 112, but we may see interim dips on its way upward.
USDCNY (6.7106) has risen slightly, but the overall trend looks bearish.
Aussie (0.7155) has declined too but could limit its downside to 0.71 from where we may expect a bounce back towards 0.72-0.73.
Pound (1.3501) also trades lower and can test 1.3450 before rebounding.
USDINR (95.4450) has clearly broken above 95.25/30, contrary to our expectations of holding below it. Now there is room for a rise towards 96-96.50 on the upside. Only dollar selling from RBI could take the pair down in the near term. Otherwise, we may expect USDINR to rally in the near future.
INTEREST RATES
The US Treasury Yields have risen sharply. A surge in Crude Oil price has taken the yields higher. If the momentum sustains, then the yields can rise further in the coming days. The German Yields have also risen sharply. They have room to rise further. Outlook remains bullish. The ECB raised their policy rates by 25bps in its meeting yesterday. The 10Yr GoI is inching up. That keeps intact our overall bullish view of seeing more rise.
The US 10Yr (4.96%) and 30Yr (5.37%) yields have surged and have come up to 5% and 5.4% much faster than expected. If they breach these levels, then 5.1%-5.2% (10Yr) and 5.5% (30Yr) can be seen.
The German 10Yr (3.5%) and 30Yr (3.88%) Yields have risen further sharply. The 10Yr can see an extended rise to 3.6% if it breaks above 3.5%. The 30Yr on the other hand can rise to 4%-4.1%.
The 10Yr GoI (6.9762%) is inching up. We retain our bullish view of seeing 7.1%-7.15% on the upside. A break above 7% can trigger this rise.
STOCKS
Dow remains weak near 52000, with a break below this level opening the way towards 51000-50000. DAX can decline towards 25000, while Nifty remains vulnerable towards 23000 below 23500. Nikkei has weakened below 64000 and can fall towards 63000-62000. Shanghai is testing 3850 support amid Middle East tensions, with a break below it opening 3800-3750.
Dow (52181.23, +0.17%) tested a low of 51992 in line with our expectations. A sustained break below 52000 would trigger a further fall towards 51000-50000.
DAX (25340.77, -0.30%) has fallen in line with our expectations and can decline further towards 25000 in the coming sessions.
Nifty (23,477.80, +0.20%) tested a low of 23380 before closing higher. While the index remains below 23500, downside risks remain open towards 23000 in the coming week.
Nikkei (63240.36, -1.08%) has fallen below 64000, contrary to our expectations, and can decline further towards 63000-62000.
Shanghai (3856.65, -1.98%) had a gap-down opening near 3910 and has fallen sharply amid rising Middle East tensions. It has tested a low of 3854 so far and needs to hold above 3850 to maintain the earlier mentioned 3850-4000 range. Otherwise, a break below 3850 would trigger a further fall towards 3800-3750.
COMMODITIES
Brent and WTI have surged amid escalating Middle East tensions, with further gains towards $115 and $110 possible. Gold needs to hold above $4300 to retain upside potential towards $4600. Silver remains weak and can decline towards $60. Copper has plunged after tariff concerns eased, leaving it vulnerable towards $6.40. Natural Gas remains range-bound between $2.80-$3.00 while above $2.80.
Brent ($108.01) and WTI ($102.83) have soared amid escalating tensions in the Middle East. A further rise towards $115 and $110 respectively can be seen in the near term.
Gold ($4362.20) needs to hold above the support near $4300. This would keep alive the chances of a rise towards $4600. Otherwise, a break below $4300 would drag the price towards $4200-$4000.
Silver ($63.76) is falling, contrary to our expectations, and remains vulnerable to a further decline towards $60.
Copper ($6.53) has plunged 4.95% after Reuters reported hesitation over tariffs on refined copper imports. It remains vulnerable to a further decline towards $6.40.
Natural Gas ($2.8340) has held above $2.80 and can continue to trade within the $2.80-$3.00 range.
DATA TODAY
6:00 11:30 UK Trade Bal
...Expected -22.4 GBP(bln) ...Previous -23.0 GBP(Bln)
12:30 18:00 US CPI (MoM)
...Kshitij Expn. 0.1 ...Expected 0.4 ...Previous 0.1
12:30 18:00 US Core CPI (MoM)
...Kshitij Expn 0.2 % ...Expected 0.2 % ...Previous 0.2 %
DATA YESTERDAY:-
----------------
ECB Mtg
...Expected 2.65 % ...Previous 2.40 % ...Actual 2.65%
US PPI
...Kshitij Expn.0.3 % ...Expected 0.4 % ...Previous 0.1 % ...Actual 0.4 %
US PPI ex Food & Energy (MoM)
...Kshitij Expn -0.1 ...Expected 0.3 ...Previous0.3 ...Actual 0.2
US Ex Home Sales
...Kshitij Expn 4087 K ...Expected 3980 K ...Previous 4060 K ...Actual3980 K
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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