GOOD MORNING!
FOREX
The Dollar index trades above 101 and the Euro near crucial support at 1.14. The Dollar index will have to rise above 101.50 to turn bullish and pave way for 102-104 dragging Euro down towards 1.13/1.12 in the medium term. Else we may expect the paths to reverse from current levels. EURINR can test 107.77-107.50 before bouncing from there while EURJPY may hold within 183-186 region for now. USDJPY tested 161.928 and has fallen back from there. It could test 161 soon. USDCNY can test 6.78 before coming off towards 6.76/75 again. Aussie looks bearish to 0.69 while Pound has already plunged to levels below 1.3250 and needs to bounce back to avoid further decline. USDINR may move higher towards 95 on Dollar strength and Euro weakness.
Dollar Index (101.04) has risen above 101 as expected. Coming into the crucial resistance zone of 101-101.50, it would now be important to watch if the index declines back below 101 to decline back to lower levels or does it sustain higher, breaking above 101.50 to turn further bullish.
EURUSD (1.1424) also similarly has crucial support at 1.14. A bounce from here will bring back 1.15/16 into the picture else a break lower will suggest fresh breakout turning medium term bearish for the Euro.
EURINR (108.0939) has crucial support at 107.77-107.50 region above which there can be scope for a rise to 108/109 region. We may expect a test of the support in the next few sessions.
EURJPY (184.60) needs to remain above 183 for it to rise to 186 and remain ranged within the mentioned levels. A breakout from this range will be crucial for the next course of direction.
Dollar-Yen (161.58) tested 161.928 before falling sharply from there exactly as expected. We remain cautious at 162 for any possible intervention from the central bank. Above 162, the spot may test 163. On the downside 160 is an immediate support.
USDCNY (6.7739) is headed towards 6.78 while the Dollar Index remains strong. Thereafter, the spot can come off towards 6.77/76.
Aussie (0.6981) has dipped as expected and can soon test support at 0.69. Thereafter , whether it bounces back to 0.70/71 again or falls further to 0.68 needs to be seen.
Pound (1.3240) trades above 1.32 but it needs to sustain above this level to move back towards 1.33/1.35 in the near to medium term. Else we may have to allow for a decline to 1.30.
USDINR (94.66) is likely to rise towards 95 and slowly break higher on Dollar strength and Euro weakness.
INTEREST RATES
The US Treasury Yields have moved up further. That keeps the bias positive to go further higher from here to test their key short-term resistance. The German Yields have dipped again. Failure to rise back immediately can drag them to test their support again. That in turn will delay our expected rise. The 10Yr GoI continues to remain stuck in a narrow range. It can fall further from here before a sustained reversal is seen.
The US 10Yr (4.5%) and 30Yr (4.95%) have risen further. As mentioned yesterday, the 10Yr can rise to 4.55%-4.6% on a break above 4.5%. The 30Yr on the other hand can rise to 5%-5.5% while above 4.9%.
The German 10Yr (2.95%) and 30Yr (3.51%) have dipped again. Failure to rise back immediately can drag them down to 2.9%-2.85% (10Yr) and 3.45%-3.4% (30Yr) again. That in turn will delay the rise to 3.1% (10Yr) and 3.65% (30Yr) is possible.
The 10Yr GoI (6.8473%) continues to remain stuck around 6.85%. The downside remains open to see 6.8% first. Thereafter a rise is possible.
STOCKS
Dow and DAX need to break above 53000 and 25500 respectively to target higher levels; otherwise, they remain vulnerable to a pullback. Nifty continues to hold above 24000 and needs a break above 24200 to rise towards 24400. Nikkei has seen a sharp correction after testing recent highs but remains constructive above 70000, with scope for a bounce back towards 73000-74000. Shanghai remains the strongest among the major indices and can extend its rally towards 4250-4300 if it breaks above 4200.
Dow (52155.13, +0.10%) has risen but continues to face resistance near 52700-53000. This region needs to be breached to trigger a further rise towards 53500-54000. Otherwise, the index remains vulnerable to a decline towards 51000-50000.
DAX (25193.20, -0.42%) rose to test a high of 25353, contrary to our expectations. The previously mentioned resistance near 25500 needs to be broken to trigger a rise towards 26000-26500.
Nifty (24,102.90, +0.37%) closed lower after testing a high of 24168. While above 24000, a break above the immediate resistance near 24200 is needed to push the index higher towards 24400 over the week.
Nikkei (71805.47, +1.06%) tested a high of 73830 yesterday in line with our expectations. Today, it has fallen back sharply and has already seen a low of 71670. While above 70000, a bounce back towards 73000-74000 can be seen.
Shanghai (4174.69, +0.29%) has risen sharply in line with our expectations as investors returned from the three-day Dragon Boat Festival holiday with optimism over improving corporate earnings. A break above 4200 would take the index higher towards 4250-4300 in the coming weeks.
COMMODITIES
Crude prices continue to decline in line with expectations. Brent and WTI remain bearish and likely to fall further towards $75-$70 and $70-$65 respectively. Gold and Silver also remain under pressure and can decline towards $4100-$4000 and $60 before a meaningful reversal is seen. Copper has tested key support near $6.25-$6.30, and while this region holds, the possibility of a bounce back towards $6.50 remains intact. Natural Gas continues to trade within the broader $3.00-$3.50 range and is likely to remain range-bound for some time.
Brent ($77.96) has fallen in line with our expectations and can decline further towards $75-$70 in the near term.
WTI ($74.03) has fallen as expected and can decline further towards $70-$65 in the near term.
Gold ($4180.50) is falling in line with our expectations and can test $4100-$4000 in the near term before a reversal is seen.
Silver ($63.95) has fallen in line with our expectations and can decline further towards $60 in the near term.
Copper ($6.33) fell to a low of $6.27 and tested the immediate support in line with our expectations. While this level holds, the possibility of a bounce back towards our earlier mentioned target of $6.50 remains alive.
Natural Gas ($3.2320) can remain within the broad $3.00-$3.50 range for some time.
DATA TODAY
NO MAJOR DATA TO BE RELEASED TODAY
DATA LAST FRIDAY
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GMT 12:30 IST 18:00 CA Inflation Y/Y
...Previous 2.82
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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