GOOD MORNING!
FOREX
The outlook on most currencies looks uncertain as there is no directional clarity for the medium term. Most of them have breached crucial supports/resistances and need to sustain to confirm the medium-term direction. The Dollar Index has extended to 108.485 on the stronger US GDP release, the Euro is trading below 1.04 with the possibility of a support zone near 1.0330-1.0300 likely to hold. Both DXY and Euro can target 110 and 1.0330 if the current momentum holds. EURINR is stuck within 89.50/90-88 region. Aussie has immediate support around 0.62, above which it has a scope to bounce back towards 0.6300-0.6350 while the Pound has slipped below 1.25 and can extend to 1.24/23 in the coming sessions. USDJPY tested 157.93 much sooner than expected. It can rise further on Dollar strength. Similarly, EURJPY needs to be watched around current levels. A break past 163/164 can turn bullish. USDINR has risen past 85 and can extend towards 85.10/20 before a corrective dip is witnessed in the near term. Watch out for US Personal Income & US PCE data release scheduled today.
Stronger than expected US GDP at 3.03% (2.8%) led the Dollar Index (108.413) to extend its rise to the high of 108.485 before declining a bit from there. The next target on the upside is coming at 110 but it looks uncertain as it can only be tested on continued trade above 108 in the near term. The Index will have to break below 107 to negate such a rise.
EURUSD (1.0363) initially rose to the level of 1.0422 but could not sustain and started coming off. Near-term support is coming around the 1.0330-1.0300 region. Need to see whether the Euro bottoms out around the mentioned support region and starts a fresh rally or continues to fall further. For now, while the support holds, a bounce back towards 1.0450 can be seen in the coming sessions.
EURINR (88.2386) is stuck within 89.50/90-88 region. Currently, it is trading lower within the range but, a break on either side will be needed for further directional clarity.
The anticipated rise to 157 in Dollar-Yen (157.15) happened a bit sooner than expected and even got extended to the high of 157.929 before falling from there. The authorities might intervene to protect Yen from significant depreciation but if the Dollar Index continues to ascend towards 110, then USDJPY can also rise towards 160 or even higher in the coming sessions. Movement from here looks a bit uncertain just now.
EURJPY (162.71) tested 163.800 on the upside contrary to our view of holding below 163, but could not sustain and started coming off. The anticipated fall towards 160 cannot be fully ruled out while it trades below 163. Only if the cross sustains above 163 and breaks past 164, it can make the outlook further bullish in the near term. Watch price action closely around current levels.
USDCNY (7.2981) is slowly inching up higher and can soon test our initial target of 7.30. Thereafter, whether it extends the rise to 7.35 or gets halted around 7.30 for the time being will have to be seen. Overall, while the immediate support at 7.28 and lower at 7.25 holds, the view remains bullish towards 7.35 in the near term.
Aussie (0.6225) seems to be holding well above 0.62 for now, and there could be some scope to see a rise back towards 0.6300-0.6350. Only a decisive break below 0.62, if seen, can make us revise our view accordingly.
Pound (1.2487) has slipped below the lower end of its range of 1.28-1.25. Now if the fall continues, it can get extended to 1.24-1.23 in the coming sessions. The pair must rise back within its 1.28-1.25 range to negate this fall. Need to be cautious around current levels.
USDINR (85.0520) rose past 85 yesterday to test 85.0850. It is also trading higher on the NDF above 85. The ongoing rise might get extended to 85.10/20 in the coming sessions before a corrective dip is witnessed in the near term. Upside momentum looks strong just now and could strengthen on a stronger Dollar going forward.
INTEREST RATES
The US Treasury yields have risen well above their key resistances. While this sustains, there will be room to rise more in the coming days. The German yields have risen sharply. Bullish view is intact, and the yields can rise further. The 10Yr GoI is coming close to its key resistance. We expect the resistance to hold. The yield can reverse lower and resume its broader downtrend.
The US 10Yr (4.55%) and 30Yr (4.73%) yields have risen well above 4.5% and 4.7% respectively. While this rise sustains, 4.8% (10Yr) and 5% (30Yr) can be seen on the upside. The yields have to fall below 4.5% (10Yr) and 4.7% (30Yr) to negate the rise and reverse lower.
The German 10Yr (2.30%) and the 30Yr (2.53%) yields have risen sharply after being stable for a couple of days. Bullish view is intact to see 2.4%-2.45% (10Yr) and 2.6% (30Yr) on the upside. Upside can be capped at 6.83%-6.84%. We expect the yield to reverse lower and fall back to 6.7%-6.65% going forward.
The10Yr GoI (6.8216%) opened with a wide gap-up and sustained higher. 6.83%-6.84% can cap the upside. We expect the yield to reverse lower and resume the broader downtrend targeting 6.7%-6.65% on the downside.
STOCKS
The Dow Jones initially attempted a corrective rise to 42,800 but failed to sustain intraday gains. Support near 42100 will have to hold to produce a rise else it can fall towards 41,500-41,300. DAX dropped below 20,000, opening the possibility of a fall to 19,500-19,400. Nifty slipped below 24,000 but there is support at 23,800-23,600 which is expected to hold and provide a base for recovery. Nikkei remains below 39,000, maintaining a bearish outlook towards 38,000. Shanghai continues to trade below 3,400, with a bias for further declines towards 3,300.
The Dow (42342.24, +0.04%) is getting some relief. The support at 42100 has to hold to produce a corrective rise. A break below 42100 can drag the Dow down to 41500-41300.
DAX (19969.86, -1.35%) has declined as expected. A break below 19900 can take it down to 19500-19400.
Nifty (23951.70, -1.02%) below 24000. Support is at 23800 which can be tested and can hold on its first test. But a strong and sustained rise above 24100 is needed to bring back the bullishness and avoid a fall below 23800. We will have to wait and watch.
Nikkei (38889.90, +0.20%) has risen a bit but remains under pressure, trading below 39,000. The bearish bias toward 38,000 persists while the index stays below 39,000. Conversely, a sustained rise above 39,000 could invalidate the bearish view and shift momentum to the upside.
Shanghai (3377.1049, +0.22%) continues to trade below 3,400 and above 3,350, with a bearish bias targeting 3,300. A break below 3,350 would accelerate the decline toward 3,300. However, a sustained move above 3,400 is necessary to avoid further downside risks.
COMMODITIES
Crude prices continues to fall as Dollars strengths further. The prices may remain ranged between 75-71 (Brent) and 72-67 (WTI) for the upcoming weeks. Gold holds above 2600 and can bounce back towards 2650-2700. Silver and Copper has fallen and can continue fall further towards 29 and 4.05 respectively in the near term. Natural Gas has risen sharply and looks bullish towards 3.8-4.0 while above 3.6.
Brent ($72.55) has dipped slightly as the Dollar continues to strengthen. It can fall towards 71 in the near term. A broad range of 75-71 is expected to hold for the upcoming weeks.
WTI ($69.09) has also dipped slightly. A sustained break below 69 can take it further down towards 67 in the near term. Overall, a broad range of 72-67 can hold for some time.
Gold ($2617.70) is holding above it's immediate support at 2600 and while above this, we retain our view of seeing a rise to 2650-2700.
Silver (29.48) has fallen further to 29.15 yesterday, contrary to our expectations. Immediate support is coming near 29. We will have to see whether this level holds and pushes the price back towards 30-31 or else breaks below 29 and turn bearish towards 28-27. Watch price action near 29.
Copper (4.09) has dipped slightly. Immediate support is at 4.05, which can be tested in the near term before bouncing back from there to 4.15-4.20.
Natural Gas (3.6610) surged above 3.6 and tested a high of 3.6460 yesterday due to forecast of cold US temperature. While it sustains above 3.6, it can increase further towards 3.8-4.0 in the upcoming weeks. Else it can fall back to 3.5-3.4.
DATA TODAY
23:30 05:00 JP CPI
... Kshitij Exp 2.4 ... Expected 2.6 ... Previous 2.2
13:30 19:00 US Personal Income
... Kshitij Exp 0.6% ... Expected 0.4% ... Previous 0.6%
13:30 19:00 US PCE Price Index M/M
... Kshitij Exp 0.2% ... Expected - ... Previous 0.3%
DATA ON YESTERDAY:-
---------------
3:00 08:30 BOJ Meeting
... Kshitij Exp - ... Expected 0.3% ... Previous 0.25% ...Actual 0.25%
11:00 16:30 BOE Mtg
... Kshitij Exp - ... Expected 4.8% ... Previous 4.75% ...Actual 4.8%
11:00 16:30 UK BOE Minutes
... Kshitij Exp - ... Expected 0-2-7 ... Previous 0-8-1 ...Actual 0-3-6
13:30 19:00 US Philifed Index
... Kshitij Exp -3.5 ... Expected 2.5 ... Previous -5.5 ...Actual -16.4
13:30 19:00 US GDP
... Kshitij Exp - ... Expected 2.8% ... Previous 2.8% ...Actual 3.0%
15:00 20:30 US Existing Home Sales
... Kshitij Exp 3894K ... Expected 4110K ... Previous 3960K
14:00 02:30 US TICS (Net foreign purch of long-term Sec)
... Kshitij Exp - ... Expected - ... Previous 216.1
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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