GOOD MORNING!
FOREX
Risks of an escalating US-Iran conflict pose some threat for the Dollar Index to hold on to 101 and start rising higher in the near term in which case the other major currencies may weaken against the Dollar. Euro may come off towards 1.1350, USDJPY could break above 162.85 to head towards 163/165 target zone, EURJPY could rise on a break above 186.32 and the Aussie and Pound could dip to 0.69 and 1.34/33, respectively. EURINR has some scope to test 109.50 before rising towards 110 while USDCNY needs to hold above 6.77 for 6.78-6.7850. USDINR can rise to 96.50-96.75 with limited scope of dip to 96.
Dollar Index (100.785) has immediate resistance at 101 which could push the index back towards 100.50 or lower. But at the same time the risks of escalation in the US-Iran conflict may weigh and pose a higher possibility of a break past 101.
EURUSD (1.1432) continues to trade within the 1.1470-1.1370 region for now ahead of the ECB policy meeting this week. 1.15-1.13 could be a broad region of trade for the near term.
EURINR (110.0956) could have some scope to dip to 109.50 before bouncing back from there to head towards 110.50-110 again in the medium term.
Dollar-Yen (162.37) Is holding below the high of 162.84 and may consolidate for the near term within the 162.85-161.50 region. While the overall trend remains up with a target of 163/165, an initial break above 162.85 will give the first confirmation.
EURJPY (185.66) has interim resistance near 186.32, a break above which can trigger a rise targeting 188 in the medium term. Bullishness in the currency pair would come in on a sharp rise in the USDJPY in the medium term.
USDCNY (6.7743) can have immediate resistance near 6.78/7850 below which the pair can trade within a range of 6.7850-6.7650. Above 6.7850, there is another important resistance near 6.80/81. So overall, the direction for USDCNY is bearish below 6.80 with downside limited to 6.75 in the near term.
Aussie (0.6989) could range within the 0.70-0.6950 zone for the near term while the Pound (1.3455) has support at 1.34 and lower at 1.33 with immediate upside capped at 1.35.
USDINR (96.27) is looking bullish for the near term for a rise towards 96.50-96.75 with some scope of briefly testing 96.00 on the downside. The rise could be supported by higher Brent crude prices that trade above $90 just now. It looks like a buy on dips for the near term.
INTEREST RATES
The US Treasury Yields remain lower. There is limited room on the downside. We expect the support to hold and the yields to rise back eventually going forward. The German Yields sustain higher and keep intact the bullish view. They can rise more. The 10Yr GoI has risen back. That keeps alive the chances of seeing more rise to test its resistance before resuming the broader downtrend.
The US 10Yr (4.55%) and 30Yr (5.07%) yields remain lower. Support at 4.5% (10Yr) and 5% (30Yr) are likely to limit the downside. We expect the yields to breach 4.6% (10Yr) and 5.1% (30Yr) and rise to 4.7%-4.8% (10Yr) and 5.2% (30Yr) eventually.
The German 10Yr (3.12%) and 30Yr (3.62%) Yields sustains higher. The upside remains open to see 3.2% (10Yr) and 3.75% (30Yr). Support is at 3%-2.98% (10Yr) and 3.55% (30Yr).
The 10Yr GoI (6.7799%) has risen back well. That keeps alive the chances of seeing 6.8%-6.85% first before a reversal to 6.6% happens.
STOCKS
Dow is likely to remain within the 52000-53000 range while above 52000, although a break below this level cannot be ruled out. DAX continues to trade within the 24700-25500 range while support at 24700-24800 holds. Nifty may witness a gap-down opening but can recover towards 24400-24600 while above 24000. Nikkei remains bearish towards 62000-61000. Shanghai continues to weaken below 3800 and can decline further towards 3700-3600.
Dow (52317.86, -0.11%) fell sharply to a low of 52174 on Friday. While above 52000, our earlier mentioned range of 52000-53000 remains intact. However, with the ongoing tensions in the Middle East, the possibility of a break below 52000 cannot be ruled out.
DAX (24924.77, -0.18%) dipped to 24715 before bouncing back to the current level. While 24800/24700 holds, the broad range of 24700-25500 could remain intact for some time.
Nifty (24,334.30, +1.09%) surged above 24250 on Friday. Today, it could open with a gap down near 24000. While above this level, a bounce back towards 24400-24600 remains likely.
Nikkei (65050.77, -0.23%) tested a low of 62860 in line with our expectations and remains bearish towards 62000-61000.
Shanghai (3764.15, -3.05%) plunged well below our expectations and hit a low of 3745.45 on Friday. While below 3800, it remains vulnerable to a further decline towards 3700-3600.
COMMODITIES
Brent and WTI have reached our earlier targets and can extend their gains towards $95 and $90 respectively. Gold continues to test the crucial $4000 support, and a sustained break below this level could trigger a decline towards $3800-$3600. Silver is likely to remain range-bound between $55 and $65 while support at $55 holds. Copper has bounced from key support and can rise further towards $6.50. Natural Gas remains weak and can decline towards $2.85-$2.80 in the near term.
Brent ($91.12) and WTI ($84.35) have risen to our mentioned levels and can extend their gains towards $95 and $90 respectively in the near term.
Gold ($3999.20) is attempting to break below the key support at $4000. A sustained break below this level would trigger a further decline towards $3800-$3600.
Silver ($55.81) can continue to trade within the broad $55-$65 range for some time, while support at $55 holds.
Copper ($6.26) dipped to test the support near $6.20, in line with our expectations, and has bounced back. A further rise towards $6.50 can be seen.
Natural Gas ($2.8830) remains flat but could decline towards $2.85-$2.80 in the near term.
DATA TODAY
9:00 14:30 EU GDP
...Previous -0.2 %
12:30 18:00 CA Inflation Y/Y
...Previous 3.23% -
FRIDAY'S DATA:-
--------------
EU CPI (YoY)
...Kshitij Expn 3.0 % ...Expected 3.2 % ...Previous 3.2 % ...Actual2.8 %
US Housing Starts
...Kshitij Expn 1390 K ...Expected 1320K ...Previous 1199 K ...Actual1427K
US Industrial Production
...Kshitij Expn -0.08 % ...Expected 0.20 %...Previous 0.20 % ...Actual 0.00 %
US Capacity Utilization
...Kshitij Expn 75.99 % ...Expected 76.20 % ...Previous 76.10 % ...Actual 76.10 %
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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