GOOD MORNING!
FOREX
The Dollar Index rallied yesterday on geopolitical stress and crisis in Iran. But whether this would hold and take the index further up towards 101+ is to be seen. EURUSD has declined on a strong Dollar and could test 1.14 soon as the Dollar index rallies towards 101+. EURINR looks weak and can test 105 soon while the EURJPY could head towards support near 180. USDJPY has risen beyond our expectated level of 156. If the DXY tests 101 or higher, USDJPY can rise to 159/160 soon.
USDCNY trades above 6.90 and needs to sustain higher for a further rise to 6.95. The Aussie can test 0.69 on a break below 0.70 while the Pound has also plunged on Dollar strength and is now headed towards 1.31/30 while below 1.33. USDINR is likely to open with a gap up today and could rally above 92 towards 92.50 in the near term. Need to see how far this can sustain.
Dollar Index (99.179) has rallied on Iran crisis and can be possibly seen as a safe haven rally. But we need to see if this would fade off soon or continue to hold in the medium term. Above 99, there is room for a rise to 101 on the charts.
EURUSD (1.1594) plunged to 1.1610 yesterday on rally in the Dollar. If the Dollar index continues to rise towards 101, Euro could soon fall to 1.14 on the downside.
EURINR (106.8039) has broken below support near 107 and has scope to fall further to 105. Thereafter we need to see if the cross bounces back higher or declines further in the medium term.
EURJPY (182.70) is declining from resistance at 185. There is scope for a decline to 180 soon before a pause is seen.
Dollar-Yen (157.62) has risen fatser than our expectations, breaking above our mentioned level of 156 along with the rally in the dollar index. There is scope for a rise to 159/160 and can be accompanied by a rise in Dollar Index towards 100/101 it even higher.
USDCNY (6.9212) opened with a gap up today but may fall to 6.90. A sustained rise above 6.90 is needed for the pair to rise from here. Else it can decline towards 6.88/85 again.
Aussie (0.7004) also tested 0.6945 yesterday before rising back to current level. Aussie will have to sustain above 0.70 to rise further towards 0.71/72 else could be vulnerable to decline to 0.69 or lower.
Pound (1.3321) has dipped on Dollar strength over the last 2-sessions. It tested 1.3252 yesterday, breaking below the crucial support at 1.33. Failure to hold above 1.33 can make it vulnerable to a sharp decline towards 1.31/30.
USDINR (90.5950) closed at 91.4750 on Monday. Yesterday the Indian markets were closed but the pair rallied on the offshore market to test 92.2050 before coming off slightly. The pair is likely to open with a gap up today also. But a break above 92, if seen can open chances of 92.50.
INTEREST RATES
The US Treasury and the German yields have risen back sharply over the last couple of days after testing their support. While this bounce sustains, both the yields can rise further in the coming days. The 10Yr GoI looks mixed. The broader picture remains bullish. But whether the yield can rise from here itself or after seeing a near-term dip is not very clear.
The US 10Yr (4.06%) and 30Yr (4.70%) Treasury yields have risen back sharply from their support at 3.9% and 4.6% respectively. While this bounce sustains, the yields can rise to 4.2% (10Yr) and 4.8%-4.85% (30Yr).
The German 10Yr (2.75%) and 30Yr (3.38%) yields have risen back from their support. They can now go up to 2.9% (10Yr) and 3.5% (30Yr).
The 10Yr GoI (6.6753%) is oscillating around 6.7%. Supports are at 6.65% and 6.6% which can still be tested. But broadly the yield can sustain above 6.6% and rise to 6.8% eventually.
STOCKS
Global equities turned weak amid rising geopolitical tensions in the Middle East and a sharp rise in oil prices, which has increased concerns over inflation and growth. The Dow has slipped below 48000 and may fall further towards 47500–47000 unless it rebounds to 48500. DAX plunged nearly 1000 points as investors reassessed growth expectations, with further downside towards 23500–23250 likely. Nifty has rebounded but remains bearish while below 25000 with room to fall towards 24400–24000. Nikkei also declined sharply on risk aversion and may test 54000–53500. Shanghai has turned weaker but can hold within a range of 4200–4050 while above immediate support at 4050.
Dow (48,367, -0.40%) fell below our expected level and tested a low of 47,681 yesterday. A sustained break below 48,000 is needed for a further decline towards 47,500–47,000, else it can see a near-term bounce towards 48,500.
DAX (23,923, +0.67%) plummeted by almost 1,000 points and fell to a low of 23,613 yesterday as geopolitical tensions in the Middle East escalated again, pushing oil prices sharply higher. This has forced investors to reassess growth expectations and the inflation outlook, hitting cyclical and export-oriented stocks hard. A further decline towards 23,500–23,250 remains likely in the near term.
Nifty (24,865.70, -1.24%) has rebounded, but as long as it remains below 25,000, the outlook stays negative with scope for a decline towards 24,400–24,000 in the near term.
Nikkei (54,500, -1.52%) fell sharply to a low of 53,620 yesterday due to the ongoing conflict in the Middle East. A further decline towards 54,000–53,500 remains likely in the near term.
Shanghai (4,089.58, -0.80%) reversed and fell to a low of 4,122 yesterday, contrary to our expectation. While above the immediate support near 4,050, a range of 4,200–4,050 can hold for some time.
COMMODITIES
Crude prices have surged sharply amid escalating Middle East tensions. Brent targeting $86–$88 and WTI eyeing $78–$80 as long as momentum sustains. Gold and Silver witnessed steep declines but are holding near key supports at $5,000 and $78 respectively, which could trigger a rebound towards $5,200–$5,300 in Gold and $86–$88 in Silver. Copper has turned weak below $6 and may slip further towards $5.6–$5.5. Natural Gas has recovered and can extend gains towards $3.1–$3.15 if it holds above $2.8.
Brent ($82.56) soared to a high of $85.12 as the war in Iran entered its fourth day with no signs of de-escalation. An adviser to Iran’s Islamic Revolutionary Guard Corps commander told Iranian state TV on Tuesday that “we will set fire to any ship attempting to pass through” the Strait of Hormuz, which runs along Iran’s coast and handles nearly a fifth of the world’s oil supply. The price can continue its bullish move towards $86–$88 or even higher.
WTI ($75.44) rose sharply in line with our expectations and tested a high of $77.98 yesterday. Ongoing tensions in the Middle East are keeping the price bullish, with potential to move towards $78–$80 in the near term.
Gold ($5,164.40) plummeted to a low of $5,005 yesterday. Immediate support is seen near $5,000, and while this level holds, the downside may remain limited to $5,000, followed by a bounce towards $5,200–$5,300.
Silver ($83.64) fell sharply to a low of $78.06 yesterday. While it holds above $78, a rebound towards $86–$88 can be expected in the near term.
Copper ($5.8690) reversed sharply to $5.7470 yesterday, contrary to our expectations. While it remains below $6, a further decline towards $5.6–$5.5 could be seen in the coming sessions.
Natural Gas ($3.0470) has bounced back, contrary to our expectations. While it sustains above $2.8, the rise may extend towards $3.1–$3.15 in the near term.
DATA TODAY
GMT 22:30 IST 04:00 AU PMI
...Previous -19.4
GMT 0:30 IST 06:00 AU GDP
...Expectations 0.7 ...Previous 0.4
GMT 7:30 IST 13:00 CH CPI
...Expectations 0.2 ...Previous 0.0
GMT 10:00 IST 15:30 EU Unemp
...Expectations 6.2 ...Previous 6.2
GMT 13:15 IST 18:45 US ADP Emp
...Expectations 49.0 ...Previous 22.0 -
DATA YESTERDAY
================
GMT 23:30 IST 05:00 JP Unemp
...Expectations 2.6 ...Previous 2.6 ...Actual 2.7
GMT 10:00 IST 15:30 EU Flash CPI (YoY)
...Expectations 2.2 ...Previous 1.7 ...Actual 1.9
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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