GOOD MORNING!
FOREX
The Dollar Index could slip to 101.50–101.00 while below 102.50; a break below 101 would turn the medium-term view bearish. EURUSD may rise to 1.1220/1.1250 before easing back to 1.11. Dollar-Yen faces resistance at 158.30 with downside possibility of 157, while EURJPY could rise towards 177/178. EURINR may dip towards 105, and the Aussie looks set to fall towards 0.69. The Pound is bullish towards 1.35, while USDINR may test 94.50 before bouncing back towards 95. USDCNY has bounced back well after weaker PMI and the central bank’s announcement to use the overnight interest rate as its main policy tool. It could trade higher for the rest of the week.
Dollar Index (101.80) tested 101.42 yesterday before bouncing back sharply from there. While below 102.50, there is scope for a fall to 101.50-101.00 in the near term. Note that 101 is an important level above which the index could still have some chances to recover and rise in the medium term, else a break below 101, if seen can trigger medium term bearishness.
EURUSD (1.1187) tested 1.1237 before falling back from there. Euro has scope to rise to 1.1220/1.1250 region before coming off from there back towards 1.11.
Dollar-Yen (157.89) is likely to face rejection from near term resistance at 158.30 and fall towards 157 or lower while EURJPY (176.64) could rise towards 177/178 so before facing any near term rejection from 178. A break above 178 if seen and sustained would indicate bullishness thereafter.
EURINR (105.9816) has dipped below 106 and if It sustains, we may have to allow for a dip towards 105 before rebounding higher in the medium term.
USDCNY (6.6661) rose sharply after China’s central bank said it would use the overnight interest rate as its main policy tool. However, weak PMI data yesterday could also limit further gains in the Yuan in the very near term. In that case, a sustained rise can take it towards 6.68 on the upside before a pause is seen. This has been contrary to our expected bearishness for the near term.
Aussie (0.6990) has declined below 0.70 and looks bearish for further decline towards 0.69 before rebounding from there in the medium term.
Pound (1.34) almost tested 1.3450 yesterday before coming off from there. Near term looks bullish for a rise towards 1.35.
USDINR (94.89) has sustained well below 95 and has scope to test 94.50 before bouncing back towards 95 again in the medium term.
INTEREST RATES
The US Treasury and the German Yields are coming down in line with our expectation. Both the Yields have room to fall further from here and test their support. After this fall they can reverse higher and resume their broader uptrend. The 10Yr GoI has come down to test its support much faster than expected. A corrective bounce is possible from this support before an extended fall breaking below this intermediate support is seen.
The US 10Yr (4.91%) and 30Yr (5.29%) Yields are coming down towards 4.85% (10Yr) and 5.2% (30Yr) as expected. After this fall, they can reverse higher and go back up to 5.15%-5.2% (10Yr) and 5.4% (30Yr) and higher. That in turn will keep the broader uptrend intact.
The German 10Yr (3.29%) and 30Yr (3.66%) Yields are heading down to test 3.25% (10Yr) and 3.6% (30Yr) in line with our expectation. Thereafter the yields can rise back and go up to 3.7% (10Yr) and 4%-4.1% (30Yr).
The 10Yr GoI (7.3154%) is coming down towards 7.3% much faster than expected. A bounce back to 7.4% is possible from around 7.3%. An extended fall to 7.25%-7% is still a possibility while below 7.4%.
STOCKS
Global equities remain mixed, with the Dow and DAX vulnerable below 52,000 and 26,000, and downside risk towards 51,500 and 25,500. Nifty continues to show strength above 23,400, with scope towards 23,600 and above. Nikkei stays weak below 64,000, with 62,000 as the next downside marker. Shanghai has broken below 3,600 and can slide towards 3,500.
Dow (51983.98, +0.41%) has attempted to test the high of 52424 before closing below 52000. While it stays below 52000, the scope for a fall towards 51500 remains open in the coming sessions.
DAX (25981.09, +0.63%) moved higher and tested the high of 26022 before closing at the current level. While it stays below 26000, the index has scope to decline further towards 25500 in the coming session. Only a decisive break above 26000 will take the index higher towards 26500-26600.
Nifty (23440.80, +1.68%) has closed above 23400 as expected. It may open with a gap up near 23500. The index needs to sustain above 23400 to move higher towards 23600 and above in the coming session.
Nikkei (63081.64, -0.33%) stays below 64000 with downside open towards 62000 over the week. Markets remain closed today on account of Culture Day in Japan.
Shanghai (3590.10, -1.32%) has broken below 3600 as expected and is moving lower. Further decline can be seen towards 3500 in the coming weeks while it stays below 3600.
COMMODITIES
Crude oil prices slumped on Monday amid diplomatic hopes. Brent and WTI risk further extensions toward 102 and 94 before a potential bounce. Gold has staged a short-term recovery but remains biased toward 3850–3800 while capped below 4000, while Silver's minor rebound leaves it vulnerable to further declines toward 45. Copper holds support near 6.4 for a potential bounce toward 6.6–6.7. Natural Gas continues to range-trade between 2.7 and 3.2.
Brent ($104.90) and WTI ($96.67) prices slumped on Monday amid hopes that diplomatic efforts could resolve the US-Iran conflict, which has disrupted Middle Eastern fuel supplies. The decline could extend further towards 102 and 94, respectively, before a bounce back occurs. We will need to wait and watch for further clarity.
Gold ($3958.80) has bounced back due to near-term buying, but as long as it trades below 4000, it can continue to decline towards 3850–3800 in the near term.
Silver ($50.35) has recovered slightly but remains vulnerable to a further decline towards 45 in the near term.
Copper ($6.51) can bounce back towards 6.6–6.7 while support near 6.4 holds.
Natural Gas ($2.8740) is expected to continue trading within a range of 2.7–3.2 for some time.
DATA TODAY
4:30 10:00 RBA Meeting
...EXpected 4.85 ...Previous 4.60
4:30 10:00 CH CPI
...Kshitij Expectation...1.4 EXpected 0 ...Previous 1.0
YESTERDAY's DATA:-
----------------
CN PMI
...Previous 52.1 ...Expected 52.0 ....Actual 52.00
JP PMI
...Expected 53.3 ...Prevvvious 53.3 ...Actual 53.3
IN Manufacturing PMI
...Previous 54.9 ...Expected 54.9 ....Actual 54.7
CH PMI
...Kshitij Expn. 56.7 ...Previous 55.3 ...Expected 55.3 ....Actual 56.7
EU PMI
....Previous 52.4 ...Expected 52.4 ....Actual 52.7
UK PMI
...Kshitijj Expn 54.3 ...Previous 52.8 ...Expected 52.8 ....Actual 52.8
CA PMI
...Previous 51.5 ....Actual 49.6
US Manufacturing ISM
...Kshitij Expnn. 55.3 ...Previous 54.5 ...Expected 54.7 ....Actual 54.5
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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