GOOD MORNING!
FOREX
The Dollar index trades have risen sharply after the FED hiked rates by 25bps leading to a sharp decline in Euro below 1.15. USDJPY has risen along with the rise in the Dollar index and looks bullish in the near term while the EURJPY could also rise towards 180.50. Aussie and Pound have scope for an initial decline for the next few sessions. USDCNY continues to look bearish. USDINR could open with a gap up today and rise towards 96-96.50 in the near term.
Dollar Index (100.275) has broken above 100 after the FED hiked rates by 25bps. However it has to be seen if the rise sustains in the medium term or if the index would decline back towards 99 after a brief test of 100.50-101.
EURUSD (1.1468) has broken below 1.15 contrary to our expectations on decline in the Dollar index. Only if it sustains, we may expect a further dip towards 1.14 or lower else a rise back towards 1.1550-1.16 can come into the picture in the medium term. Watch price action while below 1.15.
Dollar-Yen (156.09) has risen well along with the rise in the Dollar Index. The current rise needs to sustain for a further upmove towards 157-158.
EURJPY (178.90) has scope to rise towards 180.25-180.50 in the next few sessions
EURINR (110.2199) has come off sharply. However, sharp rise in the USDINR, if seen can pull up the cross pair again towards 111-112 zone.
USDCNY (6.7055) has declined as expected. It could hold above 6.70 and bounce back in the near term. Failure to hold above 6.70 could then further bearish towards 6.69-6.68.
Aussie (0.7094) has dipped and could test 0.70-0.69 before pausing for a reversal.
Pound (1.3376) has broken below the expected support of 1.35-1.3450 region. Near term looks bearish towards 1.33/32.
USDINR (95.94) could open with a gap up today and is likely to test 96-96.50 in the near term.
INTEREST RATES
The US Treasury Yields are holding higher. The outlook remains bullish, and there is room to rise more. The US Federal Reserve increased the interest rates by 25 bps yesterday in line with the market expectation. The Fed Fund rate now stands at 3.75%-4%. It has also kept the doors open for another 25 bps rate hike for this year. This can aid the yields to go further higher from here. The German Yields have dipped slightly. Support is there to limit the downside. The outlook remains bullish. The 10Yr GoI has come down. Any further dip from here can be limited. The upside remains open to see more rise before a reversal happens.
The US 10Yr (4.99%) and 30Yr (5.33%) yields are holding higher. The bullish view remains intact. The 10Yr can see an extended rise to 5.1%-5.2%. The 30Yr can touch 5.5%.
The German 10Yr (3.50%) and 30Yr (3.87%) Yields have dipped slightly. But supports are there to limit the downside. View remains bullish to see 3.6% (10Yr) and 4%-4.1% (30Yr) on the upside.
The 10Yr GoI (7.0524%) has come down but can find support around 7%. While above 7%, the upside remains open to see 7.15%. Thereafter the yield can turn down.
STOCKS
The Fed raised rates by 25bps, triggering a sharp fall in Dow towards 51609 before its recovery. DAX has bounced above 25500 and can target 26000. Nifty remains weak below 23500 and can decline towards 23000. Nikkei remains vulnerable below 65000, with downside towards 63000-62000. Shanghai faces resistance near 3950 and can remain range-bound between 3850-3950.
Dow (52249, +0.64%) plunged to a low of 51609 yesterday after the Fed hiked rates by 25bps. It has now recovered above 52000, but while below 53000, it remains vulnerable to a break below 52000. A decline towards 51000 can then be seen.
DAX (25692, +0.50%) has bounced back above 25500, contrary to our expectations. It can now target 26000 in the coming sessions.
Nifty (23,217.60, +0.43%) closed flat yesterday. The index remains weak while below 23500 and has scope to fall further towards 23000 in the near term.
Nikkei (64110, -0.05%) saw a high of 64780 yesterday. As mentioned, while below 65000, it remains vulnerable to a decline towards 63000-62000 in the near term.
Shanghai (3880.45, -0.19%) bounced back from a low of 3842.72 and closed near 3892 yesterday. Immediate resistance is seen near 3950. While below this level, a range of 3850-3950 could hold for a few sessions.
COMMODITIES
Brent and WTI have fallen sharply after a larger-than-expected US crude inventory build. Both need breaks above $110 and $105 for further gains. Gold needs to hold $4300 for a rise towards $4500-$4600. Silver remains positive above $63, while a break below $63 could drag it towards $60. Copper can rise towards $6.60-$6.70 while above $6.40. Natural Gas remains range-bound between $2.80-$3.00.
Brent ($105.55) and WTI ($102.07) have fallen sharply after API data showed a 7.1-million-barrel build. This compared with expectations of a 1.6-million-barrel draw for the week ending Sept 11. Prices need to break above $110 and $105 respectively for further gains. They can then rise towards $115-$120 and $110-$115 respectively.
Gold ($4322.30) needs to hold above $4300 to keep alive the chances of a rise towards $4500-$4600. Otherwise, a sustained break below $4300 would drag the price towards $4200-$4000.
Silver ($63.70) has risen, contrary to our expectations. Immediate support is seen near $63. A break below this level could trigger a decline towards $60.
Copper ($6.50) has risen, contrary to our expectations. If it holds above $6.40, it can move further towards $6.60-$6.70. This would negate our earlier expectation of a fall towards $6.20-$6.00.
Natural Gas ($2.9010) can continue to trade within the mentioned $2.80-$3.00 range for some time.
DATA TODAY
9:00 14:30 EU CPI (YoY)
...Expected 3.3 % ...Previous 2.9 %
11:00 16:30 BOE Mtg
...Expected 3.75 % ...Previous 3.75 %
11:00 16:30 UK BOE Minutes
...Expected 3-0-6 ...Previous 3-0-6
12:30 18:00 US Philifed Index
...Kshitij Expn -55.5 ...Expected 28.9 ...Previous 47.4
12:30 18:00 US Housing Starts
...Kshitij Expn 1333 K ...Expected 1320 K ...Previous 1239 K
DATA YESTERDAY:-
----------------
UK CPI Y/Y
...Kshitij Expn. 3.1 % ...Expected 3.1 % ...Previous 2.8 % ...Actual 3.1 %
EU Ind Prodn (MoM)
...Expected -0.5 % ...Previous -0.1 % ...Kshitij Expn.-0.1 % ...Actual-0.1 %
US Retail Sales (MoM)
...Kshitij Expn. 0.2 % ...Expected 0.8 % ...Previous -0.7 % ...Actual-1.2%
US FOMC Meeting
...Expected <4.00 %...Previous <3.75 % ...Actual <3.75%
US TICS (Net foreign purch of long-term Sec)
...Expected 146.3 $bbln ...Previous 174.4 $bln ...Actual-27.9 $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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