Morning briefing: Lower US CPI brought about some volatility in the market

Vikram Murarka Kshitij Consultancy Services

Lower US CPI for Nov-22 (Headline CPI Y/Y% at 7.12%) brought about some volatility in the markets yesterday evening (Time Zone: IST) but kept the Dollar Index within the 104-106 range while Euro has been pulled up sharply above 1.06. EURJPY has fallen from 146, maintaining the 146-143 range while Aussie and Pound have moved up well but can face resistance near 0.69 and 1.25 respectively which if hold can produce a short correction. Dollar-Yen has declined from resistance at 138 and can test 134-132 while USDCNY remains below 7 and looks bearish and USDRUB remains ranged within 60-64. EURINR needs to break above 88 to move towards 90 else can fall from 88 towards 86-85. USDINR can open with a gap down on the onshore markets with a possible fall to 82.30/25 before again bouncing back to higher levels. Watch FOMC policy tonight.

The US Treasury yields have declined sharply across tenors as the inflation data release showed signs of cooling down. The Headline CPI rose 7.12% (YoY) and the Core CPI 5.96% (YoY) in November, both down from levels seen in October. The yields have room to fall further to test their key supports and then possibly rise back again. The US Fed meeting outcome tonight will need a close watch. The German yields look mixed and has equal chances to go either way from here. It is a wait and watch for now. The ECB meeting scheduled tomorrow. The Indian 10Yr and 5Yr GoI have come down sharply failing to break their resistances. They can fall further in the coming sessions.

Dow came off after testing a high of 34712 yesterday but outlook may remain bullish as long as it sustains above 34000. DAX has scope to rise further in the coming sessions. Nikkei remains bullish to see a rise towards the upper end of the 28500-27500 range. Shanghai has scope to test 3160-3150 on the downside in the near term. Nifty has risen well and has room to move up further.

Brent and WTI looks bullish for a rise towards $84-85 and $79-80 respectively. Precious metals have witnessed a sharp rise yesterday after the release of lower than expected US CPI number. The Nov-22 US CPI comes in at 7.12% lower than the market expectation of 7.34% and previous release of 7.76%. Gold and Silver are expected to rise to their respective resistance in the coming sessions. Copper needs to surpass the 3.93 level to strengthen its momentum further on the upside.

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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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