GOOD MORNING!
FOREX
The FOMC kept rates unchanged but revised expectations of inflation to higher levels cutting the growth forecasts lower. Hawkish comments boosted the Dollar index taking it above 100. There can be scope of trade between 100-101 with series of resistances in the region. Euro has scope to trade within 1.1450-1.16 while EURINR needs to sustain above 109 now to avoid another dip below the level and rise back instead towards 109.5-110. EURJPY may test 183 before rising back towards 186 later. USDJPY may trade within the 160-161 region. USDCNY can test 6.78 before coming off towards 6.76/75 again. Aussie and Pound looks bearish for the very near term. USDINR may open with a gap up today but may later fall towards 94 in the coming days.
Dollar Index (100.25) rose sharply, breaking above 100 on hawkish comments from the FED as it kept rates steady but has moved expectations of a rate hike in its next meeting in September. Watch price action between 100.25-101 region as there are series of resistances in this region that could produce a dip.
EURUSD (1.1517) fell sharply to 1.14777 before bouncing from there to current levels. While the broader 1.15-1.1675 region holds intact , a sustained break below 1.15, if seen can extend the downside to 1.14.
EURINR (109.1011) tested 108.7922 but has bounced back above 109. If the rise above 109 sustains, there is scope for a rise to 109.30/50.
EURJPY (185) tested 184.55 but has bounced back to 185 now. Downside targets of 184/183 can still be tested in the near term before rising back towards 186 in the medium term.
Dollar-Yen (160.63) rose to 160.798 before falling off from there. We continue to expect the range of 160-161 to hold for the near term.
USDCNY (6.7647) rose sharply to 6.7677 and Is holding at higher levels just now. While the Dollar Index remains strong, the Yuan can weaken to 6.78.
Aussie (0.7033) has bounced well after a brief dip to levels below 0.70. Now, a rise towards 0.7055-0.7080 can be seen.
Pound (1.3309) has also risen from a low of 1.3262. A sustained rise above 1.33 is needed to rise back to 1.34+ levels in the next few sessions.
USDINR (94.4450) could open with a gap up today on fresh Dollar strength but may then dip back towards 94 over the next few sessions.
INTEREST RATES
The US Treasury Yields have surged at the near-end (2Yr and 5Yr) and has dipped at the far-end (30Yr). The 10Yr Yield has also gone up. The US Federal Reserve’s forecast showing a possible rate hike this year has triggered this rise in the near-end yields. The Fed kept the rates unchanged in this meeting in line with the market expectation. On the charts, the 10Yr can rise more on a break above its immediate resistance. The 30Yr can dip more before reversing higher. The German Yields have come down further. There is room to dip further. The 10Yr GoI remains lower. It can fall more from here.
The US 10Yr (4.47%) has risen back well while the 30Yr (4.92%) has dipped slightly. The 10Yr can rise to 4.55%-4.6% on a break above 4.5%. The 30Yr on the other hand can still test 4.9%-4.85% and then possibly rise back again.
The German 10Yr (2.93%) and 30Yr (3.48%) yields remain lower. The downside remains open to see 2.9%-2.85% (10Yr) and 3.45%-3.4% (30Yr) before a sustained reversal happens.
The 10Yr GoI (6.8626%) remains lower. A fall to 6.8% can happen from here and then the yield can reverse higher again.
STOCKS
Global equities remain supported by optimism surrounding the expected signing of the US-Iran MoU and improving risk sentiment. Dow continues to trade near record highs and can rise towards 52500-53000. Nifty has broken above 24000 and can extend gains towards 24250-24500. Nikkei remains strong above 71000 and can rise further towards 71500-72000. DAX and Shanghai are also showing positive momentum and can advance towards 25250-25500 and 4125-4150 respectively.
Dow (52223, +0.54%) has moved higher in line with our expectations and is holding above 52000. While above 51000, a further rise towards 52500-53000 can be seen in the coming sessions.
DAX (24884, -0.20%) has recovered from recent lows but remains below 25000. While above 24500, the view remains intact for a rise towards 25250-25500.
Nifty (24,085.70, +0.40%) has finally broken above 24000 in line with our expectations. While above this level, the rise can extend towards 24250-24500 in the coming sessions.
Nikkei (71130, +1.99%) has surpassed our expected target of 71000 and continues to strengthen. A further rise towards 71500-72000 can be seen while it remains above 70000.
Shanghai (4112.42, +0.14%) has broken above 4100 in line with our expectations. While above this level, a further rise towards 4125-4150 can be seen.
COMMODITIES
Crude prices continue to weaken as the expected signing of the US-Iran MoU and the reopening of the Strait of Hormuz have eased concerns over supply disruptions. Brent and WTI remain bearish and can decline further towards $75-$70 and $70 respectively. Gold is holding above key support and can rise towards $4500-$4600, while Silver needs a sustained break above $70 to target $72-$74. Copper remains constructive above $6.40 and can rise towards $6.70-$6.75. Natural Gas continues to trade within its broader $3.00-$3.50 range.
Brent ($78.33) has fallen further below $80 in line with our expectations. While below $85, the downside remains open towards $75-$70. The expected signing of the US-Iran MoU on Friday and the reopening of the Strait of Hormuz could keep pressure on crude prices.
WTI ($74.72) has declined sharply and is approaching our target zone near $70. While below $80, the bias remains bearish and a further decline towards $70 can be seen in the near term.
Gold ($4347.20) has held above the recent low near $4200 and continues to consolidate. While above $4300, the view remains intact for a rise towards $4500-$4600 in the near term.
Silver ($69.59) has dipped slightly but remains close to the key $70 level. A sustained rise above $70 can take it higher towards $72-$74 in the coming sessions.
Copper ($6.43) has fallen back from recent highs but continues to hold above key support near $6.40. While this support remains intact, a rise towards $6.70-$6.75 can still be seen.
Natural Gas ($3.1730) remains range-bound and can continue to trade within the broad $3.00-$3.50 range for some time.
DATA TODAY
GMT 6:00 11:30 UK Unemp
...Market 5.0 ...Previous 5.0
GMT 8:30 14:00 SNB Mtg
...Market 0.00 ...Previous 0.00
GMT 11:00 16:30 BOE Mtg
...Market 3.75 ...Previous 3.75 -
GMT 11:00 16:30 UK BOE Minutes
...Market 1-0-8 ...Previous 1-0-8
GMT 12:30 18:00 US Philifed Index
...Kshitij -2.4 ...Market 11.4 ...Previous -0.4
GMT 13:00 18:30 US TICS (Net foreign purch of long-term Sec)
...Market 72.5 ...Previous 81.3
DATA YESTERDAY
==============
GMT 6:00 IST 11:30 UK CPI Y/Y
...Market 3.00 Previous 2.82
GMT 9:00 IST 14:30 EU CPI (YoY)
...Market 3.2 ...Previous 3.2
GMT 12:30 IST 18:00 US Retail Sales (MoM)
...Kshitij 0.06 ...Market 0.50 ...Previous 0.47
{GMT 18:00 IST 23:30 US FOMC Meeting
...Kshitij <3.75 ...Market <3.73 ...Previous <3.75
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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