GOOD MORNING!
FOREX
Weaker than expected US PPI ramped up the expectations that rate cuts by FED can happen soon. The Dollar Index tested 97.60 before rising a bit from there. A further rise past 99 will confirm that the downtrend has ended and a fresh rally can begin. On the other hand, Euro tested the resistance near 1.16 before coming down. The ongoing fall can get extended to 1.14 or lower. The EURINR can soon test the target of 100 before eventually turning lower as well. EURJPY can get dragged towards 164-163 if it fails to see a rise past 167. USDJPY is coming off as anticipated and while below 146, there is a scope for it to extend the fall towards 142-140 in the near term. AUDUSD and Pound can continue to hold their respective ranges of 0.6500-0.6400/635 and 1.36-1.34in the near term. The USDCNY below 7.20 can test 7.17/16 before halting. The USDINR, has upside capped at 85.75. The targets of 85.25-85.00 are kept open for now.
Softer than expected US PPI at 0.1% (0.2%) dragged Dollar Index (98.36) to the low of 97.60 before recovering a bit from there. Now, a sharp rise past 99 will be needed to assume that the index has bottomed out. For now, the deeper target of 96 is kept alive until further clarity.
EURUSD (1.1548) tested 1.1631 on the upside before cooling down. A resistance is evident between 1.16-1.17 region, while it holds a fall back towards 1.14 or lower can happen in the coming sessions. Only a rise past 1.17 if seen, can bring 1.20 into picture (less likely at the moment).
EURINR (99.2714) has risen past 99 and if sustained, can test 100 in the near term. Thereafter while the resistance near 100 holds, a corrective fall towards 98 or lower could be witnessed.
EURJPY (165.42) rose to the high of 166.74 before the cross turned lower. A strong break past 167 will be needed to bring 170 or higher levels into picture. Else, the ongoing fall can get extended to 164-163.
Dollar-Yen (143.17) is coming off in line with our bearish view and 146, a test to 142-140 looks likely to happen.
USDCNY (7.1743) is trading lower within the 7.20-7.17 range. Still the targets of 7.17-7.16 are kept open while the pair trades below 7.20.
Aussie (0.6492) and Pound (1.3562) continues to hold the respective ranges of 0.6550-0.6400/635 1.36-1.34 for now.
USDINR (85.53) tested the high of 85.65 before closing below it. The upside appears capped near 85.75, which could be tested in the near term if the rise sustains, before a potential fall towards our previously mentioned levels of 85.25-85.00 takes place in the coming weeks.
INTEREST RATES
The US Treasury Yields are coming down as expected. They have room to fall further. The view remains bearish. The German yields have declined sharply and are coming close to their key support. The price action after testing the support will need a close watch to see if a bounce is happening or not. The 10Yr GoI has dipped. But support is there to limit the downside. The view of seeing a rise continues to remain intact.
The US 10Yr (4.35%) and 30Yr (4.83%) Treasury yields have declined further. They are heading down towards 4.3%-4.25% (10Yr) and 4.8%-4.75% (30Yr) as expected.
The German 10Yr (2.47%) and 30Yr (2.93%) yields have reversed lower sharply as expected. The yields can test 2.45%-2.4% (10Yr) and 2.9% (30Yr). Thereafter we have to see if they are reversing higher or not.
The 10Yr GoI (6.3439%) has dipped slightly. 6.3% can be a good support now. While that holds, a rise to 6.45%-6.5% will still be on the cards.
STOCKS
Increasing tensions in the Middle East and final tariff deals of US with other countries are concerns along with incoming economic data are keeping the equity indices volatile. The Dow rose towards 43000 as expected but needs to see a sustained break higher, to continue moving up, while the Dax continues to decline towards 23500, from where a bounce is possible. Nifty could defend 24800 and rise back to 25000-25200 to avoid further downside extension to 24500. Nikkei and Shanghai are down and can test 37500 and 3350 respectively before a possible rebound.
The Dow (42967.62, +0.24%) had tested 43115 on Wednesday before trading lower. Yesterday, the index rose while above the immediate support at 42500. A re-attempt to rise above 43000 and sustain trade can see a pickup in upward momentum and target higher levels of 44000+.
DAX (23771.45, -0.74%) continues its decline and could soon test 23500. Thereafter, failure to bounce from 23500 can extend the fall towards 23000. could be seen soon while the index sustains trade below 24000. Watch price action near 23500.
Nifty (24888.20, -1.01%) fell sharply yesterday, triggered by a sell-off on the weekly F/O expiry date and mixed concerns on Middle East and US Trade tariffs. It would be important to see if the index can defend 24800 and rise back to 25000-25200 in the near term again else can be vulnerable to fall towards 24500.
Nikkei (37698.84, -1.24%) trades lower today, falling below our mentioned 38000 but could bounce back from 37500 to rise to 38000-38500 again in the coming sessions. A broad range of 37500-38500 can hold for the near term.
Shanghai (3381.39, -0.63%) trades lower and can test 3350 soon before rising back towards 3400. A break below 3350, if seen will make the index vulnerable to a sharper decline to 3300 or lower. For now watch price action near 3350 for a possible bounce.
COMMODITIES
Crude prices surged sharply after reports of Israel striking Iran, raising fears of supply disruptions. Brent rose above $74 and may head towards $78–$80, while WTI climbed past $70, eyeing $76–$78. Gold broke above $3,400 and could target $3,500–$3,600, while Silver may range between $36.5–$37 before moving towards $38–$40. Copper is expected to stay within the $4.80–$5.00 range. Natural gas has rebounded from $3.50, likely to hold within $3.50–$3.80 for now.
Brent ($74.54) had a corrective dip to $68.36 yesterday, but today it has surged above our expected level of $74, after Israel announced it had struck Iran, raising concerns of escalating tensions in the Middle East that could disrupt oil supplies. A further up move towards $78–$80 can be seen in the near term.
WTI ($73.43) dipped to $66.72 yesterday but has surged above $70 today, as anticipated. A further rise towards $76–$78 can be expected in the near term.
Gold ($3,449.00) has broken above $3,400 and may move higher towards $3,500–$3,600 in the coming weeks.
Silver ($36.63) plunged to a low of $35.58 before closing above $36 yesterday. A range of $37–$36.5 could hold for some time before the bullish trend resumes towards $38–$40.
Copper ($4.8170) may trade within a range of $4.80–$5.00 for some time until a breakout occurs on either side.
Natural Gas ($3.6020) has held support at $3.50 and bounced back today. A range of $3.50–$3.80 could hold for some time.
DATA TODAY
9:00 14:30 EU Ind Prodn (MoM)
...Kshitij -0.2% ...Expectation -1.5% ...Previous 2.6%
9:00 14:30 EU Trade Bal
...Expectation 20.2 ...Previous 27.9
DATA Yesterday
6:00 11:30 UK Trade Bal
…kshitij -19.2GBP Bln …Expectation -20.8GBP Bln ...Previous -19.9GBP Bln ...Actual -23.2
12:00 17:30 IN CPI
…kshitij 3.58 ...Previous 3.16 ...Actual 2.82
12:30 18:00 US PPI
…kshitij 0.2% …Expectation 0.2% ...Previous-0.5% ...Actual 0.1
{12:30 18:00 US PPI ex Food & Energy (MoM)
…kshitij 0.4 …Expectation 0.3 ...Previous-0.4 ...Actual 0.1
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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