GOOD MORNING!
FOREX
Fresh attacks between US and Iran over the weekend and Iran calling the Strait of Hormuz closed has led to a stronger Dollar against major currencies. We expect Dollar Index to fluctuate within 100.40-102 for the coming sessions while Euro can test 1.1350/1.13 on a break below 1.1370. The markets await the US CPI data release today. EURINR holds support near 108.70 and may rise towards 109.50 if it holds; else it can fall back to 108. USDJPY has risen above 162, keeping our medium term target of 163/165 intact while EURJPY may remain confined within 183-186 zone unless a decisive breakout occurs. USDCNY could retest 6.7850/6.80 if it sustains the rise from current levels due to fresh dollar strength. Aussie and Pound are likely to remain range-bound within 0.68-0.70 and 1.33-1.35, respectively, while USDINR looks bullish above the 95-94.90 floor, targeting 96 eventually. India CPI is also expected to release higher today.
Dollar Index (101.167) has risen above 101 again on fresh exchange of attacks between the US and Iran over the weekend. Immediate floor for the dollar index on the downside is 100.40 and 102 on the upside; a break on either side will be needed for a medium term directional breakout. US CPI data release today needs a close watch to see if the markets expect further hawkish stance from the FED in its upcoming meetings.
EURUSD (1.1390) has fallen to test the lower end of the 1.1370-1.1470 range mentioned last week. A sustained break below 1.1370, if seen, would trigger further decline towards 1.1350/1.1300 in the coming days. or the very near term.
EURINR (108.8474) has dipped to test support near 108.70. A bounce from here can reinforce a rise towards 109-109.50 in the coming days (more likely). Else, below 108.70, the cross may head towards 108.
Dollar-Yen (162.02) tested 161.28 on Friday before rising sharply to 162+ now on Dollar strength due to fresh US-Iran conflicts over the weekend. That keeps our upside targets of 163/165 intact while the pair trades above 161.
EURJPY (184.59) has held the resistance at 186 and may test 183.75-183.00 in the coming days.
USDCNY (6.7791) could dip while below 6.7850. If the pair moves up on fresh Dollar strength, we ay expect a bounce to 6.80 again in the coming days. Watch price action near interim resistance at 6.7850.
Aussie (0.6934) and Pound (1.3378) have dipped once again after fluctuation seen in the last week. Aussie has once again reached to almost test the lower support at 0.69 while Pound may have some scope to test 1.3350-1.33 before bouncing back again in the medium term. For Aussie, a break below 0.69, if seen can trigger further dip to 0.6870. Watch price action for the next few sessions while both currencies remains broadly stable within 0.6850-0.70 and 1.33-1.35.
USDINR (95.33) looks intrinsically bullish for the near to medium term for a rise to 96 but needs an initial confirmation on a break above 95.50. Till then, we may expect trade within 94.90-95.50 to hold. Markets expect a higher CPI print today, which if seen can lead to mild weakness in the Rupee today.
INTEREST RATES
The US Treasury Yields have risen back well as expected. Oil price rise has taken the yields higher. The US Yields have room to rise more in the coming days. The US CPI data release tomorrow will need a close watch. The German Yields have dipped. But supports are there to limit the downside and push them higher again. The 10Yr GoI has come down. A further fall from here may negate the rise that we had expected earlier and drag it down from here itself.
The US 10Yr (4.59%) and 30Yr (5.08%) yields have risen back again. A rise above 4.6% (10Yr) and 5.1% (30Yr) can them higher to 4.7%-4.8% and 5.2% respectively.
The German 10Yr (3.06%) and 30Yr (3.60%) Yields have dipped slightly. But support at 3%-2.98% (10Yr) and 3.55% (30Yr) can limit the downside and push them higher to 3.15%-3.2% (10Yr) and 3.75% (30Yr).
The 10Yr GoI (6.7139%) has come down. A dip below 6.7% can drag it lower to 6.6% and lower without seeing the rise to 6.8%. We reiterate that while below 6.8%, the downside is open to see 6.5%-6.4%.
STOCKS
Global equities remain under pressure as renewed Middle East tensions continue to weigh on market sentiment. Dow remains vulnerable to a decline towards 52000-51800 while below 53500. DAX is testing key support near 25000 and can fall further towards 24800-24500. Nifty may see a gap-down opening but is likely to remain within the 23800-24400 range while support near 23800 holds. Nikkei is testing the crucial 68000 support, while Shanghai remains weak below 4000 and can decline further towards 3925-3900.
Dow (52730, -0.33%) is holding below 53500. While below this level, our view remains intact for a further decline towards 52000-51800 in the near term.
DAX (25030.44, -0.67%) has fallen back and is testing the support near 25000. A break below this level could drag the index down towards 24800-24500, and this looks increasingly likely amid renewed Middle East tensions.
Nifty (24,206.90, +1.02%) closed near 24200 on Friday. Today, it could open with a gap down near 24000 or lower as tensions in the Middle East continue to weigh on sentiment. While 23800 holds, the range of 23800-24400 remains intact in the near term.
Nikkei (67815.56, -2.17%) is testing the key support near 68000. A sustained break below this level could trigger a further decline towards 67500-67000.
Shanghai (3953.78, -1.07%) has again fallen below 4000, contrary to our expectations. The market remains highly volatile due to prevailing uncertainty in the Middle East and remains vulnerable to a further decline towards 3925-3900.
COMMODITIES
Commodities have turned mixed as renewed Middle East tensions have lifted crude prices, while abundant US gas supplies continue to weigh on Natural Gas. Brent and WTI can rise further towards $85 and $80 respectively. Gold and Silver are likely to remain range-bound within $4000-$4250 and $55-$65 respectively. Copper continues to face resistance near $6.30 and could trade within the $6.00-$6.30 range. Natural Gas has turned weak below $3.00 and can decline further towards $2.85-$2.80.
Brent ($79.28) has bounced back sharply and opened higher after renewed Middle East tensions, with Iran declaring the closure of the Strait of Hormuz and fresh US strikes on Iranian targets raising fears of supply disruptions. A further rise towards $85 can be seen in the coming sessions.
WTI ($74.54) has opened higher as tensions in the Middle East continue to escalate. A further rise towards $80 can be seen in the coming sessions.
Gold ($4077.20) could continue to trade within the broad range of $4000-$4250 for some time while it remains above $4000.
Silver ($58.79) remains weak but could trade within the broad range of $55-$65 for some time.
Copper ($6.22) is facing immediate resistance near $6.30. While this level holds, a range of $6.00-$6.30 could persist over the next few sessions.
Natural Gas ($2.9060) has broken below $3.00, contrary to our expectations, as abundant US supplies weighed on prices after the weekly EIA report showed inventories were 6.6% above their five-year average as of July 3. A further decline towards $2.85-$2.80 can be seen in the coming sessions.
DATA TODAY
GMT 12:00 IST 17:30 IN CPI
...Kshitij 3.9 ...Previous 3.9
DATA LAST FRIDAY
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{GMT 12:30 IST 18:00 CA Labour Force
...Market 10.0 ...Previous 87.80
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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