GOOD MORNING!
FOREX
Dollar Index tested 104.02 yesterday but has currently recovered back from the low. It still needs to rise past 104.50 to negate a fall below 104. EURUSD has an interim resistance at 1.0870/80, a break past which can take it higher towards 1.09/0950. Yen and Yuan strengthened against Dollar significantly as the pairs USDCNY, USDJPY and EURJPY tested the lows of 7.2193, 151.93, and 164.83 before recovering from there. The Aussie and Pound can test 0.6500-0.6400 and 1.28 on the downside before attempting to rise back. USDINR if fails to break below 83.65, can increase the chances of seeing a rise towards 83.80 or higher in the coming weeks. EURINR needs to rise past 91, else it is likely to fall towards 90.50. Watch out for the US PCE data release scheduled today.
Dollar Index (104.32) tested 104.08 yesterday as the US Durable MoM (%) goods slipped sharply to -6.6%, below market expectations of 0.4%. But soon the index recovered from there as the US GDP Q2 second estimate came out stronger at 2.8% than expected 1.9%. US PCE is scheduled today which can bring in some volatility in the index as well. Watch price action closely around current levels to see if the index manages to sustain above 104 or not.
EURUSD (1.0855) had strengthened to a high of 1.0869 before declining from there. An interim resistance around 1.0870/80 can be spotted on the charts, a break past which will be needed to head towards 1.09/0950. Failure to do so can drag the pair to 1.08 or even lower in the near term.
Dollar-Yen (153.93) and EURJPY (167.10) tested 151.93 & 164.82 on the downside in line with our bearish view before recovering from there. Now if the support holds, a bounce back towards 156-158 and 168-170 could be seen in the medium term. Else the Dollar Yen will have to decisively break below 152 to drag itself lower towards 150. Fow now 152 could hold for the near term.
Along with the Yen, Yuan strengthened against Dollar, taking USDCNY (7.2460) to test 7.2105 on the downside. Currently it has recovered from the low but still a rise past 7.25 will be needed to bring 7.28 into the picture. Else, a break below 7.20 can make the outlook bearish in the medium term.
Aussie (0.6550) and Pound (1.2861) tested 0.6513 and 1.2850 and are likely to extend their fall towards 0.6500-0.6400 and 1.28 respectively in the near term. Immediate recoveries from recent lows could be short lived.
USDINR (83.7025) needs to necessarily break below support at 83.65 else it would increase the chances of the pair rising towards 83.80 or higher in the coming sessions. The pair trades higher despite a relatively weaker Dollar and recent strength seen in Euro, Yen and Yuan against the Dollar. It would be crucial to watch price action near 83.73/75.
EURINR (90.8996) rose to a high of 91.02 yesterday, but could not sustain and has declined a bit. A sustained rise past 91 will be needed to avoid falling a fall towards 90.50 or lower in the near term.
INTEREST RATES
The US 2Yr yield has bounced from its support as expected and can see more rise. At the far-end the yields remain mixed. But supports are there to push them also higher in the coming days. The US Personal Consumption Expenditure (PCE) data release today will be important to watch. The German yields have come down again. But support can limit the downside and keep the broader uptrend intact. The 10Yr and 5Yr GoI are coming down as expected. The view is bearish, and they can fall more.
The US 10Yr (4.25%) remains stable while the 30Yr (4.49%) has come down sharply. While above 4.2% (10Yr) and 4.4% (30Yr) the bias is positive to see a rise to 4.3%-4.35% (10Yr) and 4.5%-4.55% (30Yr). The 2Yr (2.44%) on the other hand has risen back as expected from its 2.4%-2.38% support zone. While this bounce sustains, a rise to 4.6% is possible.
The German 10Yr (2.41%) and the 30Yr (2.62%) yields have come down again to their support at 2.4% and 2.6% respectively. We expect this support to hold and trigger a bounce. Only a decisive break below 2.4% (10Yr) and 2.6% (30Yr) will negate the bullish view of seeing 2.8% (10Yr) and 3% (30Yr) on the upside.
The 10Yr GoI (6.9512%) has dipped below 6.96% as expected and can test 6.94%. A break below 6.94% can drag it down to 6.9% and even lower.
The 5Yr GoI (6.8639%) has declined further sharply. The bearish view of seeing 6.8% on the downside remains intact.
STOCKS
Dow Jones attempted to recover but failed and came off sharply, which continued to keep it vulnerable to see a fall to 39500. DAX may hold above the support at 18200-18000 and rise back up towards 18600-18800. Nifty has recovered a bit but needs to overcome the resistance overhead to avoid the danger of falling again. Nikkei too has recovered slightly but could face rejections from 39000. Shanghai remains bearish for the near term.
Dow (39935.07, +0.20%) has come-off sharply from the high of 40,438. That continues to keep it vulnerable to break 39800 and fall to 39500. A sustained rise above 40300 is needed to avoid this fall.
DAX (18298.72, -0.48%) fell below 18200 but has recovered back from the low of 18096. While above 18200, a strong follow-through rise from here can take it up to 18600-18800 again.
Nifty (24,406.10, -0.03%) has risen back well from the low of 24210. The bias is positive while above 24200. But a strong follow-through rise above 24500 is needed for a rise to 24800-25000 and avoid the danger of falling below 24000.
Nikkei (38049.50, +0.39%) has recovered a bit but could face resistance at 39000. While 39000 holds, a fall towards 37000-36000 cannot be negated.
Shanghai (2876.84, -0.34%) remains lower below 2900. View remains intact to see a fall towards 2850-2800 in the near term.
COMMODITIES
Crude prices have recovered sharply after stronger than expected release of US GDP, which came at +2.8% vs market expectation of +2.0%, which is a positive news for oil demand. Gold and Silver have bounced back slightly but bias remains bearish to see a further fall. Copper has recovered a bit but needs to surpass 4.2 to strengthen the bullish case. Natural gas has declined again but is likely to get support at 2.0-1.9.
Brent ($82.59) bounced back sharply after testing a low of $80.06. A test of key resistance at $84 looks likely now. After that we need to see if it falls back towards $78 from there or breaks higher towards $86-86.50.
WTI ($78.52) bounced backs sharply from a low of $76.04. We had expected to see a fall towards $75-74. If the bounce sustains, a rise towards $80 can be seen.
Gold (2372) indeed fell to 2352 and has bounced back a bit from there. There is room to come down some more towards 2320-2300 and then a rise back towards 2400 can be seen.
Silver (28.12) fell to 27.56 yesterday before bouncing back slightly from there. A further fall towards 27 cannot be ruled out while it remains below 29.
Copper (4.1480) has recovered from a low of 4.04. It has to rise past 4.2 to become bullish towards 4.4. Else it can fall to 3.8 and then bounce back towards 4.4 from there.
Natural Gas (2.09) couldn't sustain the bounce seen yesterday and has fallen back below 2.10. Key support is at 2.0-1.9. As long as that holds, chances of rise towards 2.4-2.5 in the near term remains intact.
DATA TODAY
12:30 18:00 US Personal Income
Kshitij Expn 0.4% ...Expected 0.4% ...Previous 0.5%
12:30 18:00 US PCE
Kshitij Expn 0.1 ...Expected 0.2 ...Previous 0.0
12:30 18:00 US Core PCE Price Index M/M
Kshitij Expn 0.2% ...Expected 0.3% ...Previous 0.1%
Data Yesterday
..............
8:00 13:30 GER IFO Business Climate
Kshitij Expn 88.1 ...Expected 88.9 ...Previous 88.6 ...Actual 87.00
8:00 13:30 GER IFO Business Situations
Kshitij Expn 87.0 ...Expected 88.5 ...Previous 88.3 ...Actual 87.1
8:00 13:30 GER IFO Business Expectations
Kshitij Expn 88.1 ...Expected 89.0 ...Previous 88.8 ...Actual 86.9
12:30 18:00 US Durable Goods Orders YoY
Kshitij Expn -2.80% ...Expected -3.60% ...Previous -1.45% ...Actual -10.28%
12:30 18:00 US GDP
Kshitij Expn - 1.41% ...Expected 1.9% ...Previous 1.4% ...Actual 2.81%
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.
WARNING !!
Visitors should be aware that Foreign Exchange transactions and trading are or can be subject to laws, rules and regulations of the country in which the entity undertaking the transactions is situated. It is incumbent upon the Visitors to keep themselves informed and abreast of the Laws they are (or would be expected to be) subject to and governed by, and act in accordance thereto.
