Morning Briefing: We have to wait and watch

Vikram Murarka Kshitij Consultancy Services

Slight recovery seen compared to movements seen yesterday but we have to wait and watch if the recovery is temporary or will last longer. Dollar Index has come off below 114 taking euro higher but both needs to sustain the movement for the medium term to confirm direction from here. Aussie and Pound have recovered too but unless a rise above 0.66 and 1.10/12 is seen, view remains bearish. EURJPY and USDJPY can rise a bit. USDINR can trade within 82.0-81.40 for the day. USDRUB remains within 56-60 region while USDCNY has fallen below 7.20 which if sustains can drag it lower towards 7.15/10. EURINR is bullish above 77.50-78.

The Bank of England announcing yesterday that it would start buying long-dated bonds has triggered a sharp fall in the yields all over. But the price action in the next few days will need a close watch to see if the fall in the yields sustains or not. The UK gilt yields have declined sharply across tenors and can fall further if the momentum sustains. The US Treasury yields have declined sharply and will have room to fall further if it fails to bounce from here. The German yields have supports coming up which will have to hold in order to avoid a deeper fall and also to keep the broader uptrend intact. The 10Yr and 5Yr GoI have risen yesterday but looks mixed in the near-term. A corrective fall is possible before a fresh leg of rally happens.

Dow has rebounded towards 30000 as the support at 28900 seems to be holding well as of now. DAX too has bounced back but could face immediate resistance at 12400. Nikkei has rebounded from a low of 25938.36 seen yesterday but overall outlook remains weak. Shanghai is stuck between 3050-3100 range. Nifty could attempt to rise back above 17000 today following a recovery in the global market.

Commodities have witnessed a sharp recovery yesterday. Brent and WTI have risen sharply towards the immediate resistance at $90 and $82.50 respectively. Only a strong break above it could see an extended rise on the upside. Gold has surged sharply breaking above the resistance at 1660. Need to see if the bounce sustains or not. Silver and Copper too bounced back sharply from a low of 17.90 and 3.243. However, the broader picture for Gold, Silver and Copper still remains bearish.

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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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