Morning briefing: Euro has fallen sharply and could test 1.055-1.05

Vikram Murarka Kshitij Consultancy Services

Good Morning!

Sharp movements seen on the currency markets. The Dollar Index has risen above 106.5 while Euro has fallen sharply and could test 1.055-1.05 from where a bounce is needed to prevent further decline to 1.04. EURJPY could trade within 158-160 for a while as USDJPY has risen past 150 and needs to sustain to move up slowly towards 151-152 in the medium term. USDCNY may continue to trade within 7.2950-7.32. A rise past 7.32 is needed for a rise to 7.35 or higher. Pound and Aussie have fallen below 1.21 and 0.63 and look bearish towards 1.20 and 0.62 respectively unless an immediate bounce is seen. USDRUB can fall to 92.50 which needs to produce a bounce else can drag it lower towards 90. USDINR may trade within 82.90/83.00-83.30 region. EURINR can trade within 87/87.50-89.00. Important would be to watch ECB policy meeting today and US GDP data later in the evening after a fairly high German IFO data release yesterday.

The US Treasury yields have risen back sharply. A further rise from here will negate the expected dip and take them higher straight away. The German yields have bounced back and are keeping intact our view of seeing more rise from here. The outcome of the European Central Bank (ECB) meeting today will need a close watch. The 10Yr and 5Yr GoI can fall towards the lower end of their range in the near-term.

Dow Jones and Nikkei have come down again failing to sustain the bounce and may fall further it they fails to sustains above their support at 32850 and 30500 respectively. DAX and Shanghai outlook is mixed. Nifty has come down as expected but failure to get a bounce back from its support can see an extended fall.

Brent and WTI have rebounded from their support levels and may look to rise further from here. Gold and Natural gas remains bullish for the near term. Silver is inching down towards its lower end of the 22.50/80-24 range. Need to see if silver holds above 22.50 or not. Copper is likely to consolidate within 3.65-3.50 for some time.

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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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