GOOD MORNING!
FOREX
The Dollar index may dip to 99.5-99 on a break below 99.75 while the Euro has scope to test 1.16/17 while above 1.15. Markets expect a 25bps rate hike by the ECB today. EURINR looks bearish below 111 towards 110-109, while the EURJPY could test 186 while above 185. USDJPY continues its slow uptrend to 161 while USDCNY looks bearish towards 6.76/75 while below resistance at 6.80. Aussie and Pound can rise to 0.71-0.7150 and 1.35 respectively from current levels. USDINR dipped to 95.0850 yesterday. There is scope for a further dip to 95-94.80 while below 95.50.
Dollar Index (99.945) needs to break below 99.75 to turn bearish towards 99.50-99.00 again for the near term. Till then it can remain stable above 99.75.
EURUSD (1.1542) is likely to rise towards 1.16-1.17 in the near term while above 1.15. The ECB is expected to hike rates by 25bps in its policy meeting today.
EURINR (110.1272) may trade within 110-111 region for the near term. A break below 110, if seen can be bearish towards 109 again in the medium term.
EURJPY (185.33) has risen well above 185 and is headed towards 186 while Dollar-Yen (160.51) is headed towards 161 where it could pause for a reversal.
USDCNY (6.7767) is almost stable. It is likely to trade between resistance at 6.80 and support near 6.75 for now.
Aussie (0.7002) has scope to rise back towards 0.71-0.7150 if it holds above 0.70 in the near term. Else it can fall back towards 0.69.
Pound (1.3377) has scope to rise towards 1.34-1.3450 while above 1.33.
USDINR (95.2750) tested 95.0850 yesterday before bouncing back from there to close higher. It could attempt to test 95.50 with some chances of seeing a dip below 95 towards 94.80/50.
INTEREST RATES
The US Treasury Yields have risen back well. The inflation data release has aided this bounce back. However, the yields have to rise past their immediate resistance in order to gain strength and go further higher. The US CPI rose 4.17% (YoY) in May from 3.78% in April. High inflation is likely to aid in limiting the downside for the Treasury Yields going forwards. The German Yields have moved up. A further rise from here can take them higher and will avoid the chances of falling back. The ECB meeting outcome today evening will need a close watch. The 10Yr GoI has bounced back well from its support. Need to see if it is getting a strong follow-through rise from here to avoid the danger of seeing an extended fall. We will have to wait and watch.
The US 10Yr (4.55%) and 30Yr (5.03%) Treasury yields have risen back well. As mentioned yesterday, a rise above 4.6% (10Yr) and 5.05% (30Yr) is needed to go up to 4.8% (10Yr) and 5.2% (30Yr). Only then the fall to 4.45%-4.4% (10Yr) and 4.95%-4.9% (30Yr) can be avoided.
The German 10Yr (3.07%) and 30Yr (3.62%) yields have moved up. While above 3.03% (10Yr) and 3.58% (30Yr), the rise to 3.1%-3.2% (10Yr) and 3.65%-3.7% (30Yr) can happen straight away. It will also negate the chances of seeing 2.9%-2.85% (10Yr) and 3.45% (30Yr) on the downside.
The 10Yr GoI (6.9353%) has bounced back. A strong follow-through rise above 6.95% will ease the downside pressure and will take it up to 7%. That will also reduce the danger of seeing an extended fall to 6.8%.
STOCKS
Global equities remain under pressure following higher US CPI and renewed Middle East tensions. Dow and DAX have weakened sharply and could decline further towards 49500-49000 and 23500 respectively if key support levels are broken. Nikkei has turned bearish after breaking below 64000 and can fall further towards 62000. Shanghai continues to weaken in line with expectations and may decline towards 3900-3850. Nifty remains relatively stable but needs to hold above 23150 to recover towards 23400 over the week.
Dow (50021.33, +0.09%) has fallen sharply to a low of 49873 yesterday due to higher US CPI data. A sustained break below 50000 could drag it further down towards 49500-49000.
DAX (24048.21, -0.80%) plunged to test a low of 24052 yesterday in line with our expectations, driven by renewed Middle East tensions and higher US CPI. A break below 24000 could drag it further down towards 23500.
Nifty (23,214.95, -0.12%) attempted to rise above 23,400 but failed to sustain and closed lower yesterday. It needs to hold above 23150 to bounce back towards 23400 over the week.
Nikkei (63875.13, +0.24%) broke below 64000 and tested a low of 63360 yesterday. Today, it has already tested a low of 62535. A further decline towards 62000 can be seen.
Shanghai (3966.83, -0.67%) has fallen back in line with our expectations and can decline further towards 3900-3850.
COMMODITIES
Crude prices have rebounded on renewed geopolitical tensions and can rise further towards $100 in the coming weeks. Gold has weakened sharply after falling below $4200 and could decline further towards $3900-$3800 if it breaks below $4000. Silver remains bearish and can extend losses towards $62-$60. Copper has also turned weak and may decline further towards $6.10-$6.00. Natural Gas is holding above $3.00 and is likely to remain within the broader $3.00-$3.50 range for some time.
Brent ($94.60) has bounced back due to fresh US strikes on Iran. A further rise towards $100 can be seen over the coming weeks.
WTI ($91.74) has bounced back above $90, and if it sustains above this level, a further rise towards $100 can be seen over the coming weeks.
Gold ($4075.90) has fallen sharply below $4200 as US CPI came in above 4%, in line with market expectations. A break below $4000 would trigger a further decline towards $3900-$3800.
Silver ($63.20) is falling in line with our expectations and can continue its decline towards $62-$60 in the coming sessions.
Copper ($6.19) has fallen sharply and can decline further towards $6.10-$6.00 in the near term.
Natural Gas ($3.1910) tested $3.07 yesterday, and while above $3.00, it can trade within a broad range of $3.00-$3.50 for some time.
DATA TODAY
GMT 12:15 IST 17:45 ECB Mtg
...Market 2.40 ...Previous 2.15
GMT 12:30 IST 18:00 US PPI
Kshitij 0.62 ...Market 0.70 ...Previous 1.38
GMT 12:30 IST 18:00 US PPI ex Food & Energy (MoM)
Kshitij 0.5 ...Market 0.5 ...Previous 1.0
DATA YESTERDAY
==============
GMT 1:30 IST 07:00 CN CPI (YoY)
...Market 1.3 ...Previous 1.2 ...Actual 1.2
GMT 1:30 IST 07:00 CN PPI
...Market 3.8 ...Previous 2.8 ...Actual 3.9
GMT 12:30 IST 18:00 US CPI (MoM)
...Kshitij 0.1 ...Market 0.3 ...Previous 0.6
GMT 12:30 IST 18:00 US Core CPI (MoM)
...Kshitij 0.0 ...Market 0.5 ...Previous 0.4
GMT 13:45 IST 19:15 BOC Meeting
...Market 2.25 ...Previous 2.25
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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