GOOD MORNING!
FOREX
The Dollar index has not been able to sustain above 100 and has fallen back to head towards 99, while the Euro has bounced back and could head towards 1.16 or higher soon. EURINR looks bearish below 111, while the EURJPY could test 186 while above 185. USDJPY continues its slow uptrend while USDCNY looks bearish towards 6.76/75 as it could not rise to test 6.80 on the upside. Aussie and Pound can rise to 0.71 and 1.35 from current levels. USDINR rose sharply yesterday to 95.69 but may come off sharply today again as the RBI has announced USDINR FX Swap for FCNR deposits (at 0%) and for ECBs raised by the PSUs (at 1.5%) in line with the measures announced on Friday to attract foreign capital. This should be positive for the Rupee and could take it towards 95-94.50.
Dollar Index (99.955) has come off from levels above 100 as expected. The index can attempt to fall back towards 99.50-99.30 in the near term.
EURUSD (1.1538) is holding above 1.15 and trying to recover from the sharp fall seen on Friday. If the rise sustains, the Euro can rise further towards 1.1580-1.16 before pausing for a reversal. Note 1.1650 and 1.17 are crucial resistances on the upside for the longer run.
EURINR (110.1477) has recovered sharply yesterday but still looks bearish below 111 for another test of 109 soon.
EURJPY (184.85) has bounced back well. It is trading in the middle of a broad 186-183 range where both are crucial resistance and support levels. We may expect broad movement within this range for a couple of weeks at the least. Thereafter, we need to see which way the breakout happens for the longer run. For now, a break above 185 will open door for 186.
Dollar-Yen (160.19) dipped slightly yesterday but while above 160, the view remains bullish for a rise towards 161.
USDCNY (6.7788) has dipped from 6.7866. With maximum upside limited to 6.80 in the near term, we expect the spot to dip towards 6.76/75 in the coming sessions.
Aussie (0.7052) has scope to rise back towards 0.71 if it holds above 0.70 in the near term.
Pound (1.3350) needs to sustain above 1.33 to eventually move back towards 1.34-1.3450 soon. A break below 1.33 is needed to make the price intrinsically bearish.
USDINR (95.69) rose sharply higher yesterday as expected. The RBI in line with the measures announced on Friday, has introduced a USDINR forex swap facility for the FCNR deposits (qt 0%) for a minimum of 3yrs and a maximum of 5yrs to attract foreign capital. Additionally, the RBI has also introduced an FX Swap facility for the ECBs of average maturity of 3yrs and above by PSUs (at 1.5%). This should induce Rupee appreciation for the near term and bring it back to 95-94.50 or lower in the near term.
INTEREST RATES
The US Treasury Yields continue to move up. As mentioned yesterday, a rise above their immediate resistance can strengthen the momentum and take them higher. The German Yields have moved back up. If this sustains, then more rise can be seen. That in turn can negate the danger of them falling back. The 10Yr GoI is coming down much faster than expected. It has room to fall further from here.
The US 10Yr (4.57%) and 30Yr (5.05%) Treasury yields continue to move up. A rise above 4.6% (10Yr) and 5.05% (30Yr) will clear the way to see 4.8% (10Yr) and 5.2% (30Yr) on the upside.
The German 10Yr (3.06%) and 30Yr (3.59%) yields are moving back up. If this sustains, 3.1%-3.2% (10Yr) and 3.65%-3.7% (30Yr) can be seen. That will negate the fall to 2.9%-2.85% (10Yr) and 3.45% (30Yr).
The 10Yr GoI (6.9532%) fell sharply and can go down towards 6.9% much faster than expected.
STOCKS
Dow is holding above key support near 50700 and could bounce back, but a break lower would open the way towards 50500-50000. DAX remains weak and can decline further towards 24250-24000, while Nikkei has resumed its decline and may fall towards 63000. Shanghai continues to look bearish below 4000 and can decline towards 3900-3850. Nifty can recover towards 23400 while holding above 23000.
Dow (50842.26, -0.04%) is holding above the daily support near 50700. A break below this level is needed to trigger a further decline towards 50500-50000. Otherwise, it can bounce back in the coming sessions.
DAX (24583.36, -0.34%) fell to a low of 24356 yesterday before closing higher. The view remains intact for a decline towards 24250-24000 in the near term.
Nifty (23,123.00, -1.04%) failed to reach 23400 and closed lower yesterday. While it holds above 23000, there is scope for a rise towards 23400 over the week.
Nikkei (64810.46, -1.49%) saw a bounce back to 66125 yesterday, but today it has started to weaken again. Our earlier mentioned decline towards 63000 could take place in the near term.
Shanghai (3971.89, +0.37%) opened higher near 4000, but while it remains below this level, a decline towards 3900-3850 can be seen.
COMMODITIES
Crude prices have weakened contrary to expectations, but the key question remains whether they break below $90 or hold and resume their rise towards $100. Gold and Silver remain under pressure below $4400 and $70 respectively, keeping the downside open towards $4300-$4200 and $65-$60. Copper has rebounded from recent lows and, while above $6.20, can recover towards $6.50-$6.60 instead of falling towards $6.00. Natural Gas has dipped, but the downside appears limited to $3.00, with a broader $3.00-$3.50 range likely to hold for now.
Brent ($93.95) and WTI ($90.92) have fallen back contrary to our expectations, but it remains to be seen whether they break below $90 or hold above it and rise towards our earlier mentioned target of $100.
Gold ($4361.40) is trading below $4400, and if it sustains below this level, a further decline towards $4300-$4200 remains likely.
Silver ($67.99) remains below $70 and can decline further towards $65-$60 while staying below this level.
Copper ($6.34) has bounced back after testing a low of $6.23 yesterday. If it remains above $6.20, our earlier mentioned decline towards $6.00 may not materialize, and instead it can move higher towards $6.50-$6.60.
Natural Gas ($3.1520) has dipped, but the downside looks limited to $3.00, and a broad range of $3.00-$3.50 could hold for some time.
DATA TODAY
GMT 12:30 IST 18:00 US Trade Balance
...Kshitij -48.34 ...Market -55.20 ...Previous -60.31
GMT 14:00 IST 19:30 US Existing Home Sales
...Kshitij 4060 ...Market 4080 ...Previous 4020
DATA YESTERDAY
==============
GMT 23:50 IST 05:20 JP GDP
...Market 30.0% ...Previous 0.5% ...Actual 0.5%
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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