Morning Briefing: The market expectation of 9.6% causing volatility in the Dollar Index and Euro

Vikram Murarka Kshitij Consultancy Services

Preliminary estimates of German CPI inflation for Dec-22 came out at 8.6% (lower from 10% Y/Y seen in Nov-22), lower than the market expectation of 9.6% causing volatility in the Dollar Index and Euro. Euro fell to 1.0520 before slightly rising today while the Dollar index surged from 103.50. Overall range for the index and Euro can hold within 103-105 and 1.05-1.07 respectively. EURJPY can test 137/135 while USDJPY has paused for now and could trade sideways before eventually falling towards 128/126 in the medium term. Pound is bearish below 1.20. Aussie can trade within 0.66-0.68 for now. USDRUB has risen sharply from support near 70 and can re-test 74/75. EURINR could be ranged below 88 but a rise to 89/90 cannot be negated. USDINR is holding within 82.50-83.00 but has scope to break higher. USDCNY has risen but may remain bearish while below 7.

The US and the German yields have declined sharply. But supports are there to limit the downside and keep the broader uptrend intact to see more rise going forward. The Indian 10Yr and 5Yr GoI seems to lack a strong follow-through buying. The yields are back into their narrow sideways range and can remain within it for some more time.

Dow range trade continues between 32500-33500. DAX broke the 13800-14200 range on the upside but did not sustain. Nikkei has declined but failure to hold above 25700 could target further downside in the coming sessions. Shanghai has risen sharply above resistance at 3100 and while above it, there is room to rise further on the upside. Nifty has to breach 18400 to gain strength and advance further.

Brent and WTI have declined sharply below the support at $82.50 and $78 and if the fall sustains, a further dip can be seen. Gold and Silver have scope to rise towards 1870 and 25/25.50. Copper has declined below 3.80 but may continue to trade within a broad range of 3.70-3.93 for a while.

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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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