Morning Briefing: Sharp volatility seen in currencies over yesterday and today

Vikram Murarka Kshitij Consultancy Services

Sharp volatility seen in currencies over yesterday and today. Dollar Index tested 110.78 before falling off from there. Crucial would be to watch the ECB meeting today where the central bank is expected to hike rates by at least 50bps. Euro could trade within 0.98-1.01 region. Any break on either side if seen will bring in sharp volatility. EURJPY is bullish towards 144/145 while Pound and Aussie have managed to bounce from important supports at 1.14 and 0.67 and can rise higher in the near term. Dollar Yen has scope to rise to 150 eventually while above 140. USDCNY can test resistance at 7 while USDRUB has broken above the 58-62 range and while that holds can be bullish towards 65 or higher. USDINR can trade within 80.0-79.60 while EURINR holds well above support at 79 and can rise to 80.50.

The US Treasury yields have come-off sharply across tenors following the strong bounce in the equities. However, the broader view is still bullish, and the yields have room to rise further before a reversal is seen. The German yields have also come-off across tenors. But the view remains bullish, and the yields can rise to test their resistances and then can turn down. The 10Yr GoI remains stable but vulnerable to fall first from here and then see a fresh rise. The 5Yr GoI on the other hand has just risen above its resistance and is bullish in the near-term.

Dow has rebounded sharply above 31000 but may face resistance ahead. DAX may continue to remain in a range of 12600-13200 for a while. Nikkei has bounced back sharply but could face resistance at 28150. Shanghai has dropped a bit from the resistance at 3250. Nifty is stuck in a range of 17400-17800.

Brent and WTI fell sharply breaking below the support at 90 and 85 respectively but recovered well from a low of 87.40 and 81.61 which is the current immediate support. Gold has bounced back well from the key support at 1700. Silver has bounced back but needs to break above the resistance at 18.5 to advance further. Copper is trading closely within a range of 3.4-3.5.

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Author

Vikram Murarka

Kshitij Consultancy Services

Vikram has been forecasting, trading and hedging currencies since 1991. Beginning his career as a currency trader in Essar Group, he was managing an FX exposure of $1.2 bln.

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