GOOD MORNING!
FOREX
The Dollar Index remains bullish towards 100.00–100.50 with limited downside to 97, while EURUSD is range-bound between 1.18–1.16 with bias for a break below 1.16. EURINR could test 101 before bouncing within a 101–102.50 range, and EURJPY is attempting to break lower towards 170–168 unless it sustains above 173 for a bullish move to 174–175. Dollar-Yen holds above 147 support and can rise towards 150–151, while USDCNY remains weak towards 7.1650–7.16. Aussie is bearish below 0.6450 targeting 0.64–0.6350. Pound can extend its fall towards 1.34. USDINR stays bearish towards 86.75–86.50 after failing to hold above 87.16.
Dollar Index (98.217) dipped yesterday, but our view remains intact for a rise towards 100.00–100.50 in the near term. The downside is likely to be limited to 97–96.
EURUSD (1.1646) tested a low of 1.1621 yesterday in line with expectations. A narrow range of 1.18–1.16 can hold in the near term until a breakout occurs on either side, with preference for a downside break below 1.16.
EURINR (101.29) is falling as anticipated and could test 101 in the near term, from where a bounce back can be seen. A 101–102.50 range may remain intact for some time.
EURJPY (171.69) initially broke below support and fell to a low of 171.11 before bouncing back to close higher at 171.62 yesterday. It is attempting to break lower, and a successful move below this level would drag the pair to deeper levels of 170–168 in the coming weeks, while a sustained break above 173 would be required to resume the long-term bullish trend towards 174–175.
Dollar-Yen (147.44) tested its immediate support near 147. While this holds, the pair can rise past 148 and target 150–151 in the coming weeks. Alternatively, a sustained break below 147 would open the way for a fall towards 146–145.
USDCNY (7.1719) has fallen in line with expectations and can decline further towards 7.1650–7.16 in the near term.
Aussie (0.6430) is breaking below the support at 0.6450. A sustained break below this level would confirm our earlier mentioned bearish view towards 0.64–0.6350.
Pound (1.3458) is declining as expected and could extend its fall towards 1.34 in the near term.
USDINR (87.01) tested a high of 87.1650 but fell back to close lower at 87.07 yesterday. The view remains intact for a decline towards 86.75–86.50 in the near term.
INTEREST RATES
The US Treasury yields have dipped further and have come into their support zone. We expect the support to hold and the yields to reverse higher again going forward. The Fed Chairman Jerome Powell’s speech at the Jackson Hole meeting tomorrow will be important to watch.The German yields are coming down in line with our expectation. There is room to fall more from here. The 10Yr GoI has come down and can dip further. It can oscillate in range for some time with a negative bias to fall eventually over the medium term. Strong resistance is there to cap the upside.
The US 10Yr (4.29%) and 30Yr (4.90%) Treasury yields have dipped into their 4.3%-4.25% (10Yr) and 4.9%-4.85% (30Yr) support zone. We expect this support to hold and the yields to rise back towards 4.45%-5% (10Yr), 5.05%-5.1% (30Yr) is still possible.
The German 10Yr (2.72%) and 30Yr (3.29%) yields have come down/ The fall to 2.7% (10Yr) and 3.25% (30Yr) is happening as expected. Failure to bounce back from there can see an extended fall to 2.65% (10Yr) and 3.2% (30Yr)
The 10Yr GoI (6.4969%) has dipped below 6.5%. A dip to 6.45% is likely. We repeat that 6.6% could be the maximum upside from here. For now, 6.4%-6.6% can be the broad trading range before the yield eventually breaks lower.
STOCKS
The Dow Jones is stuck below 45200-45000 and unless a strong follow-through rise is not seen above the mentioned zone, we may expect a fall to 44500-44400 initially. Dax continues to trade within 25000-23500, both being crucial resistance and support levels. A break above 25000 will be needed for the index to rise further towards 25500 over the medium term. Nifty needs to breach 25100 to move towards 25250; else, a decline back towards 24700 can be seen. Nikkei has faced rejection from 44000 and could decline towards 42000 initially. Shanghai looks strong towards 3800-4000. 4000 is a strong resistance.
The Dow (44938.31, +0.036%) tested 45033 yesterday but could not sustain higher and dipped back to close lower. Unless a strong follow-through rise above 45000-45200 is seen, there is scope for an initial fall towards 44500 or even 44000 before rising towards an upside target of 46000 over the medium term.
DAX (24276.97, -0.60%) could rise to 24500-25000 within a broad range of 25000-23500 where 24000-23500 is a crucial support zone. A break above 25000 will be needed for the index to rise further over the medium term.
Nifty (25050.55, +0.28%) has been rising over the last 2-sessions. It must breach 25,100 to move up towards 25,250 and higher in the near term. Support is now at 24800 and 24700. While below 25250, there could be one more chance of a possible dip to 24800-24700.
Nikkei (42631.34, -0.61%) has come down sharply, while the initial resistance at 44000 seems to be holding. It may fall to 42000 and even lower before resuming the upmove to target 46000 on the upside in the medium term.
Shanghai (3777.39, +0.29%) has broken above 3750 and seems to be in a strong uptrend. It can target 3800-4000 over the medium term. Note that 4000 is a very strong resistance where the index can pause its current rally.
COMMODITIES
Brent and WTI have risen as expected and may see slight further upside towards $68 and $64 respectively before resuming their bearish trends. Gold is recovering and could rise towards $3,400–$3,450, while Silver needs to break above $38 to turn bullish towards $39–$40, else it risks falling back to $36.50. Copper remains range-bound between $4.30–$4.50, and Natural Gas still looks weak towards $2.70 support, from where a bounce could occur.
Brent ($67.24) has risen in line with our expectations and can inch further up towards $68 in the near term before resuming its bearish trend.
WTI ($63.13) has bounced back as anticipated and can rise further towards $64 in the near term before turning lower again.
Gold ($3,387.30) has bounced back from the support as anticipated and can rise towards $3,400–$3,450 in the coming sessions.
Silver ($37.94) tested a low of $36.96 and bounced back sharply from there to close higher at $37.77 yesterday. It has to sustain below $37.50/$37.00 to fall towards our earlier mentioned level of $36.50. Else, it has to break above $38 to be bullish towards $39–$40, which would then confirm this fall as a false breakout and negate our bearish view.
Copper ($4.4330) can trade within the range of $4.50–$4.30 for some time until a breakout on either side occurs.
Natural Gas ($2.76) has not moved much. Our view remains intact for a decline towards the crucial support at $2.70 in the near term. If this support holds, a bounce back could follow.
DATA TODAY
12:30 18:00 US Philifed Index
...Expectation 5.9 ...Previous 15.9
14:00 19:30 US Existing Home Sales
...Kshitij 3953 ...Expectation 3920 ...Previous 3930
DATA LAST THURSDAY
===============
6:00 11:30 UK CPI Y/Y
...Kshtij 3.7 ...Expectation 3.7 ...Previous 3.6 ...Actual 3.9
9:00 14:30 EU CPI (YoY)
...Kshtij 2.5 ...Expectation 2.0 ...Previous 2.0 ...Actual 2.0
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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