Morning briefing: EUR/USD can decline below 1.1575

Vikram Murarka Kshitij Consultancy Services

Escalation of tensions in the middle east has spurred rise in the Dollar Index leading to weakness in most other currencies against the US Dollar. Dollar Index trades higher today and a sustained break above 99.50 will take it to 100-100.50 while Euro can decline below 1.1575 if such a rise in the Dollar Index is seen. EURINR could rise to 111.85-112 soon before facing rejection from there. EURJPY and USDJPY could trade within 185-186 and 159.00-160.50 respectively while USDCNY may rise to test 6.7850 before facing rejection from there. Aussie and Pound can trade within 0.72-0.71 and 1.34-1.3550 while USDINR can rise towards 96 where it can face some resistance to fall back towards 95.75-95.50 again.

The US Treasury Yields are attempting to bounce back from their support. A strong follow-through rise is needed to avoid the danger of seeing an extended fall and go higher. We will have to wait and see. The German Yields have bounced back sharply. If this sustains, then the expected fall may not happen, and the yields can rise straight away. The 10Yr GoI remains stable and mixed. As mentioned earlier, it has to get a decisive break above the immediate resistance to go higher. Else one more leg of fall can still be seen.

Global equities have weakened due to renewed Middle East tensions. Dow and Nikkie could have further downside possible if key support levels at 50500 and 67000 are broken. DAX has turned bearish after falling below 25000 and may decline further towards 24500-24000. Nifty has recovered from recent lows and, while above 23,250, can rise towards 23,600 over the week. Shanghai is testing support near 4050, but as long as this level holds, a bounce towards 4100-4125 remains possible.

Brent and WTI continue to strengthen and can rise towards $100 if geopolitical tensions remain elevated. Gold and Silver have weakened but are likely to remain within their broader $4400-$4600 and $70-$80 ranges respectively. Copper has corrected sharply but could rebound towards $6.70 or higher if support near $6.40 holds. Natural Gas remains positive above $3 and can rise further towards $3.30-$3.50.

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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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