GOOD MORNING!
FOREX
The Dollar Index trades stable ahead of the US CPI and PPI data releases and could be seen to trade within 100.40-102 region keeping Euro above 1.1370 for now with a possible gradual decline to 1.13 later. EURINR may rise on expected rise in the USDINR towards 96 while the USDJPY could reflect the movement in the dollar index after the inflation data release today. However, USDJPY may hold above support at 161.50 targeting 163/165 eventually. EURJPY may remain confined within 183-186 zone unless a decisive breakout occurs. USDCNY could retest 6.7850/6.80 if it sustains the rise from current levels due to fresh dollar strength. Aussie and Pound are likely to remain range-bound within 0.68-0.70 and 1.33-1.35 region respectively, while USDINR looks bullish targeting 96.
Dollar Index (101.23) looks stable ahead of the US CPI data release today and PPI data tomorrow for further insights into inflation trends. On the charts, the index can trade between 100.40-102 region for the near term.
EURUSD (1.1387) is holding above 1.1370 for now and could continue within the 1.1370-1.1470 region till we see a breakout on either side of the range. Medium term view is weighed more to the downside eventually targeting 1.1350/1.13.
EURINR (109.2811) has moved up as expected. A gradual rise to 109.50-110 looks possible in the coming days.
Dollar-Yen (162.40) is trading at elevated levels and while above immediate support at 161.50, a gradual rise towards 163/165 is on the cards. The movement in the dollar index seen today after US CPI will most likely be reflected in the movement in the USDJPY.
EURJPY (184.95) is likely to trade within the narrow range of 184-185 and broader range of 183-186 which may hold for the next few sessions.
USDCNY (6.7821) has almost reached the level of 6.7850 which if holds can produce a dip back towards 6.78/77 else a sustained break above 6.7850 shall open chances of a rise towards 6.80 in the next few sessions.
Aussie (0.6920) dipped from 0.6970 to 0.6913 in the last 2-sessions and could most likely be ranged within the 0.70-0.69 region with some possibility of a decline below 0.69.
Pound (1.3355) could trade within the narrow 1.33-1.34 and broad 1.3250-1.35 region for the near term till we see a decisive breakout on either side of the range.
USDINR (95.62) looks bullish for the near to medium term for a rise to 96 as the confirmation above 95.50 has been seen yesterday. A sustained break above 96 in the medium term would open up further upside in the medium term.
INTEREST RATES
The US Treasury Yields continue to move up and are just above their intermediate resistance. A strong follow-through rise from here can take them further higher. The US CPI data release will need a close watch. The German Yields have risen back as expected. The bullish view is intact, and the yields can rise more. The 10Yr GoI is holding above its support. That keeps alive the chances of a rise first before the next leg of fall happens.
The US 10Yr (4.62%) and 30Yr (5.10%) yields continue to move up. A strong follow-through rise from here can take them up to 4.7%-4.8% (10Yr) and 5.2% (30Yr).
The German 10Yr (3.11%) and 30Yr (3.62%) Yields have risen back. The outlook is positive to see 3.2% (10Yr) and 3.75% (30Yr) on the upside. Support is at 3%-2.98% (10Yr) and 3.55% (30Yr).
The 10Yr GoI (6.7309%) is holding above 6.7%. That keeps alive the chances of seeing 6.8% before a fresh leg of fall to 6.6% and 6.5%-6.4% happens over the medium term.
STOCKS
Global equities remain under pressure as geopolitical uncertainty continues to weigh on market sentiment. Dow can decline further towards 52000-51800, while DAX is attempting to break below 25000 and could fall towards 24800-24500. Nifty is holding steady and may continue to trade within the 23800-24400 range. Nikkei has turned weaker after breaking key support and can decline towards 66000-65000. Shanghai is also testing crucial support near 3900, with a break lower opening the way towards 3850-3825.
Dow (52590, -0.33%) is falling in line with our expectations and can decline further towards 52000-51800 in the near term.
DAX (24973.56, -0.91%) is attempting to break the support near 25000. A sustained break below this level could drag the index down towards 24800-24500, and this looks increasingly likely amid renewed Middle East tensions.
Nifty (24,211.00, +0.02%) rose and closed above 24200 yesterday. A broad range of 23800-24400 could hold for some time.
Nikkei (66880.97, -0.82%) has broken below support and fell sharply to a low of 66815 yesterday. A further decline towards 66000-65000 can be seen in the coming sessions.
Shanghai (3911.28, -0.07%) has fallen in line with our expectations and tested a low of 3892. A sustained break below 3900 would drag the index further down towards 3850-3825.
COMMODITIES
Commodities remain mixed as escalating Middle East tensions continue to support crude prices. Brent and WTI can rise further towards $90 and $85 respectively, with Brent turning more bullish above $90. Gold is testing the crucial $4000 support, which needs to hold to prevent a deeper decline towards $3800-$3600. Silver is likely to remain within the $55-$65 range, while Copper continues to face resistance near $6.30. Natural Gas remains weak and can decline further towards $2.85-$2.80.
Brent ($84.12) has surged to a high of $85.64, in line with our expectations, after President Trump announced that the US was reimposing a blockade on Iranian ships transiting the Strait of Hormuz. A further rise towards $90 can be seen in the coming sessions. Thereafter, a break above $90 would strengthen the bullish outlook towards $95-$100.
WTI ($79.38) tested a high of $80.42, as we had expected, amid rising tensions in the Middle East. A further rise towards $85 can be seen in the coming sessions.
Gold ($4020.10) fell sharply to test a low of $3992 yesterday. The support near $4000 needs to hold to avoid a further decline towards $3800-$3600 and keep the earlier mentioned $4000-$4250 range intact.
Silver ($57.89) is weakening and could continue to trade within the broad range of $55-$65 for some time.
Copper ($6.31) is facing immediate resistance near $6.30. While this level holds, a range of $6.00-$6.30 could persist over the next few sessions.
Natural Gas ($2.8830) has fallen to a low of $2.8470 in line with our expectations. It can decline further towards our earlier mentioned target of $2.85-$2.80 in the near term.
DATA TODAY
GMT 6:30 IST 12:00 IN WPI
...Market 9.2 ...Previous 9.7
GMT 12:30 IST 18:00 US CPI (MoM)
...Kshitij 334.1 ...Market -0.1 ...Previous 0.5
GMT 12:30 IST 18:00 US Core CPI (MoM)
...Kshitij 0.0 ...Market 0.2 ...Previous 0.2
GMT 20:00 IST 01:30 US TICS (Net foreign purch of long-term Sec)
...Market 128.5 ...Previous 103.1
DATA YESTERDAY
==============
GMT 12:00 IST 17:30 IN CPI
...Kshitij 3.9 ...Previous 3.9
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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