Morning briefing: Dow continues to fall

Vikram Murarka Kshitij Consultancy Services

FED hiked rates by 75bps as expected by the markets (lower than our expected 100bps) taking Dollar Index sharply up towards 112 now. View remains bullish as Euro can be headed to 0.97. EURJPY has fallen below 142 and can now test 140/139 while Pound and Aussie have plunged and can target 1.11/10 and 0.64 respectively before any rise is seen in the medium term. Dollar Yen rises with the Dollar Index and can test 146 while USDCNY has risen sharply and can test 7.15/20 soon. USDINR can open with aa gap up targeting 80.20-80.60/80 soon. EURINR continues within 79-80.50 while USDRUB too is stuck within a narrow range.

The US Treasury yields have surged at the near-end and while those at the far end are higher but have come-off from their highs. The US Federal Reserve raised the rates by another 75-bps yesterday in line with market expectation to 3%-3.25%. The projections showed the median Fed fund rate for 2022 will be at 4.4% which leaves the door open for another 125-bps rate hike from the next two meetings. The 10Yr and 30Yr can still rise from here while they sustain above their immediate supports. The German yields have also risen well at the near-end and have dipped at the far-end. The broader picture however is still bullish, and the yields have room to rise further. The 10Yr and 5Yr GoI have come-off yesterday. However, as long as they sustain above their supports, the outlook will remain bullish.

Dow continues to fall and has room to come down further to 30000-29500. DAX on the other hand has rebounded but could fall back again as the broader outlook still remain bearish. Nikkei has declined towards 27000 as expected. Shanghai has recovered a bit but needs a sustained move above 3100 to negate a further fall in the coming sessions. Nifty could trade in a broad range of 17400-18100 for some time.

Brent and WTI may continue to move sideways with a negative bias of seeing a dip on the downside . Precious metals continue to remain ranged within 1660-1700 (Gold), 19-20 (Silver) and 3.4-3.6 (Copper) respectively. Broader outlook remains weak to see a break below the lower end of the range and fall further on the downside.

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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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