GOOD MORNING!
FOREX
The Dollar Index holds strong above 101 while the Euro has dipped below 1.14, moving as per its intrinsic near-term trend. Euro can soon target 1.1350-1.13. The ECB kept rates unchanged yesterday but has high scope for a rate hike in September. USDJPY continues to rally, targeting 164.50-165 while Aussie and Pound have declined sharply as expected on Dollar strength triggered by the rally in Brent crude price to 102. EURINR looks bullish towards 110.50-111 while USDCNY can trade within 6.75-6.7850 for some time. USDINR is bullish towards 97.
Dollar Index (101.365) tested 101.544 overnight as Brent tested a high of 102 before coming off thereafter. View is bullish for the index while above 101-100.70.
EURUSD (1.1386) has dipped after the ECB policy meeting yesterday, where the rates were kept unchanged as per market expectations. However, the Euro looks intrinsically weak for a fall towards 1.1350-1.13 eventually.
EURINR (110.2872) looks bullish towards 110.50-111.
Dollar-Yen (163.77) tested 163.988 before coming off from there. The pair has scope to test 164.50-165 in the near term before we see a deeper correction in the medium term.
EURJPY (186.42) tested 186.66 yesterday before coming off from there. While above 186, the cross pair has decent scope for a rise towards 187/188 in the coming weeks.
USDCNY (6.7734) is likely to trade within the 6.75-6.7850 region till we see a decisive breakout from the range.
Aussie (0.6975) has dipped below 0.70 after testing 0.7021 yesterday. There can be decent support near 0.6950-0.69 region, which, if holds, can lead to a bounce back. Else, Aussie could remain in a sideways range for some time.
Pound (1.3320) has scope for a decline to 1.33 or even to 1.32/31 before it can bounce back towards 1.34/35. The resistance zone of 1.3550-1.35 has been holding well for now.
USDINR (96.5750) is bullish for a rise to 96.85-97.00.
INTEREST RATES
The US Treasury Yields are moving up as expected but at a faster pace. Surge in oil price is pushing the yields higher. The yields can rise further from here. The German Yields are inching up. The bullish view is intact. They have room to rise further. The ECB kept the rates unchanged in its meeting yesterday as expected. A rate hike in September is widely expected now. The 10Yr GoI is moving up. It can rise further from here and then can resume its broader downtrend.
The US 10Yr (4.70%) and 30Yr (5.17%) yields are rising much faster than expected. The 10Yr can extend the rise to 4.8%. The 40Yr can test 5.2% and even extend up to 5.35%-5.4% (30Yr).
The German 10Yr (3.2%) and 30Yr (3.66%) Yields have inched up. The expected rise to 3.25% (10Yr) and 3.75% (30Yr) is happening gradually.
The 10Yr GoI (6.8413%) continues to move up. A rise to 6.9% is possible on a break above 6.85%. Thereafter the downtrend can resume targeting 6.7% and 6.6%.
STOCKS
Global equities have turned weaker amid escalating tensions in the Middle East. Dow is attempting to break below 52000 and could decline towards 51500-51000 if the breakdown is sustained. DAX remains vulnerable below 24700 and can fall towards 24500-24000. Nifty has slipped below 24000 and can decline further towards 23600 while it remains below this level. Nikkei continues to weaken below 65000 and can fall towards 64000-63000. Shanghai has also turned weak and can decline towards 3800-3750 while below 3900.
Dow (51920.66, +0.05%) is attempting to break below 52000, in line with our earlier caution, amid escalating tensions in the Middle East. A sustained break below 52000 could drag the index further down towards 51500-51000.
DAX (24810.78, +0.07%) has fallen sharply due to the escalating tensions in the Middle East. A break below 24700 could drag the index further down towards 24500-24000.
Nifty (23,869.60, -0.53%) failed to sustain above 24000 and slipped to a low of 23807, as cautioned earlier. While it remains below 24000, the downside risk stays open towards 23600 in the coming weeks.
Nikkei (64410.98, -1.64%) has declined below 65000, in line with our expectations, and could fall further towards 64000-63000 in the near term.
Shanghai (3838.96, -0.98%) has pulled back amid escalating tensions in the Middle East. While below 3900, a further decline towards 3800-3750 can be seen.
COMMODITIES
Crude prices have surged amid escalating geopolitical tensions and supply concerns. Brent and WTI can rise further towards $110 and $95 respectively. Gold is likely to remain within the broad $4000-$4200 range while support at $4000 holds. Silver can continue to trade within the $55-$65 range. Copper has turned weaker after a sharp correction and could test $6.28-$6.25 before recovering. Natural Gas is expected to remain range-bound between $2.80 and $3.00 for some time.
Brent ($100.45) and WTI ($91.84) have surged after Iran-backed Houthi militants launched missile and drone attacks on two Saudi Arabian oil tankers in the Red Sea, expanding oil supply disruptions beyond the Strait of Hormuz and threatening shipments through the Red Sea. A further rise towards $110 and $95 respectively looks likely in the near term.
Gold ($4043.33) has declined, but while above $4000, the broad range of $4000-$4200 could remain intact for some time.
Silver ($57.78) can continue to trade within the broad $55-$65 range for some time.
Copper ($6.32) has corrected sharply, contrary to our expectations. It could decline further towards $6.28-$6.25 before a bounce back is seen.
Natural Gas ($2.9180) can continue to trade within the narrow range of $2.80-$3.00 for some time.
DATA TODAY
23:05 04:35 UK Cons Conf
...Expected -21 ...Previous-23
23:30 05:00 JP CPI
...Expected 1.60 ...Previous1.52
5:00 10:30 IN Flash Manufacturing PMI
...Previous 54.2
5:00 10:30 IN Flash Services PMI
...Previous 57.4
8:00 13:30 EU Flash PMI
...Expected 51.3 ...Previous 51.4
8:30 14:00 UK Flash PMI
...Expected 52.0 ...Previous 52.5
14:00 19:30 US New Home Sales
...Kshitij Expn. 623 K ...Expected 604 K ...Previous 580 K
DATA YESTERDAY:-
--------------
Australia Labour Force
...Expected 15.2 K ...Previous 4.0 K...Actual 76.3
ECB Mtg
...Expected 2.40% ...Previous2.40 % Actual2.40%
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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