GOOD MORNING!
FOREX
The Dollar Index has been trading higher and holding firm above 100 as the US-Iran conflict continues. However, there can be a dip while below 101.50-101 which if seen can strengthen Euro to 1.16-1.17 while above 1.14. EURINR may dip while below 110. EURJPY may continue to trade within 182-185 unless a breakout is seen on either side. The USDJPY has broken our expected resistance at 160 and tested 160.46 before coming off. It would be crucial to see if USDJPY regains momentum and targets 161/162 or sees a corrective dip towards 158/157. We remain cautious around 160. USDCNY is likely to test 6.93/6.95. Aussie trades below 0.69 and can fall to 0.68/67 while Pound can test 1.32/31 before a bounce is seen from there. The USDINR is likely to open with a gap down today being the last trading day of the financial year. The central bank (RBI) is likely to intervene in case a higher spot opening is seen today. While below 95, a decent 1Rupee appreciation could be on the cards.
Dollar Index (100.21) may come off while below 101.50-101 which can aid strength in the EURUSD (1.15) with downside limited to 1.14.
EURINR (109.0470) is looking stable below 110-109.50. However, in case we see a decline in the USDINR today, it could bring down the EURINR also towards 108/107 region. In line with our expectation, 110 could cap the immediate upside for now.
EURJPY (184) has been ranged within the 182-185 region and a breakout on either side is needed for clarity on further direction.
Dollar-Yen (159.96) has come off after testing 160.46 on the upside. A dip in the Dollar Index below 101.50-100 can bring the USDJPY also lower in the coming sessions. Only a break past 160.50, if seen and sustained can open upside targets of 161/162 for the medium term.
USDCNY (6.9196) is looking bullish towards 6.92/95.
Aussie (0.6852) has declined below 0.69 as expected and is likely to test 0.67 in the near term.
Pound (1.3247) has dipped below 1.3250 contrary to our expectation as mentioned on Friday. While it trades below 1.3250, we may expect a further decline to 1.32- 1.31 before pausing.
USDINR (94.8175) tested 94.8425 last week. Today being an the last trading day of the financial year and the USDINR spot being at the highest level, we may expect the RBI to intervene and bring a decline in the USDINR. Or the USDINR may open with a sharp gap down. A 1Rupee appreciation can be expected from current levels. Thereafter, it would be important to see if we get a decline below 93 in the coming days. Tomorrow Indian markets are closed for Mahavir Jayanti.
INTEREST RATES
The US Treasury Yields remain higher. The bias remains bullish. Supports are holding well. The yields can rise more from here. The German Yields have risen further. The bullish view is intact. There is room to rise further. The 10Yr GoI has risen sharply. The expected rise is happening much faster than expected and also without seeing a corrective dip.
The US 10Yr (4.40%) and 30Yr (4.95%) Treasury yields sustain higher. We retain our bullish view. The yields can rise to 4.6% (10Yr) and 5.05%-5.1% (30Yr) on a break above 4.45% (10Yr) and 4.95% (30Yr).
The German 10Yr (3.09%) and 30Yr (3.55%) yields continue to move up. The bullish view is intact. The yields can rise further towards 3.2% (10Yr) and 3.65% (30Yr).
The 10Yr GoI (6.9419%) has surged. The rise to 6.95%-7% is happening much faster than expected and also without seeing a corrective dip.
STOCKS
Global equities are under pressure as Middle East tensions continue to weigh on markets. Dow has plunged and can fall towards 45000 with deeper downside towards 44500-44000 on a break. DAX remains weak and may decline towards 22000, while Nifty can slip further towards 22600-22400. Nikkei is also falling sharply and can move towards 50000. Shanghai remains capped below 3950 with downside towards 3800-3750 in the near term.
Dow (45233, -0.44%) has plunged to a low of 45272 in line with our expectations amid the ongoing war in the Middle East. A further decline towards 45000 can be seen in the near term. Thereafter, a break below 45000 can make the index more bearish towards 44500-44000.
DAX (22215, -1.28%) has fallen sharply to a low of 22247 on Friday and remains vulnerable to a further decline towards 22000 in the coming sessions.
Nifty (22819.45, -2.09%) has tested a low of 22804 and, amid ongoing geopolitical tensions, can decline further towards 22600-22400 in the coming sessions.
Nikkei (51120, -0.52%) is falling sharply in line with our expectations due to heightened tensions in the Middle East. A further fall towards 50000 can be seen in the coming sessions.
Shanghai (3,888.80, +0.19%) is failing to break past 3950 and while below this resistance, a fall towards 3800-3750 can be seen in the coming sessions.
COMMODITIES
Crude prices remain strongly bullish on ongoing Middle East tensions. Brent can rise towards $120 with further upside to $125-$135 on a break, while WTI may move higher towards $110-$115. Gold remains uncertain but can decline towards $4200-$4000 while below $4800. Silver may fall towards $65-$60 with deeper downside if it breaks $60. Copper continues to trade weak below $5.60 and can decline towards $5.25 and $5.00. Natural Gas may remain range bound between $3.30-$2.80 for now.
Brent ($115.44) has moved up sharply to a high of $114.88 on Friday in line with our expectations. The view remains bullish towards $120 in the near term. Thereafter, a break above $120 would open higher levels of $125-$135.
WTI ($102.41) has surged above $100 as expected due to the ongoing conflict in the Middle East. A further rise towards $110-$115 can be seen in the near term.
Gold ($4498.40) remains unclear in direction for now, but while below $4800, it can decline towards $4200-$4000 in the coming sessions. Thereafter, the support near $4000 needs to hold to avoid further bearishness.
Silver ($68.82) remains uncertain in direction, but while below $75, a decline towards $65-$60 can be seen in the coming sessions. A break below $60 would make the price further bearish towards $55-$50 or even lower.
Copper ($5.4560) is holding below $5.60 and can fall towards $5.25 in the near term and $5.00 or lower thereafter.
Natural Gas ($2.9380) is trading above its immediate support and can range between $3.30-$2.80 for some time.
DATA TODAY
GMT 9:00 IST 14:30 EU Biz Climate
...Expectations 96.5 ...Previous 98.3
DATA LAST FRIDAY
==============
GMT 0:01 IST 05:31 UK Cons Conf
...Expectations -24.0 ...Previous -19.0 ...Actual -21
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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