Morning briefing: EUR/USD can test 1.1300

Vikram Murarka Kshitij Consultancy Services

Strength in the Dollar Index above 101.50 if sustains can lead to further weakness in major currencies against the US Dollar. The Euro is already trading below 1.14 and can now test 1.13 while EURINR may fall to 106/105 on a decisive break below 107. EURJPY may test 183 while USDJPY may try to push itself beyond 162 and rise to 164/165 along with the rise in the Dollar Index itself. USDCNY has risen well and can test 6.83/85 before pausing. Aussie and Pound have already declined and can test 0.68/67 and 1.31/30 respectively. USDINR fell after testing 94.9125. It is likely to hold below 95.00/10 and dip to 94.50/15 in the coming days.

US, German and the Indian yields have all declined. Opening of the Strait of Hormuz and sustained crude prices below $80 has eased inflation fears leading to a slow decline in the yields globally. The US 10Yr and 30Yr Yields can dip to 4.40% and 4.80/75%. The US PCE data release today will need a close watch. Need to see if it can provide the necessary push for the yields to bounce back. The German Yields can fall further from current levels. The 10Yr GoI has declined as well and looks bearish for the next few sessions.

Dow needs a sustained break above 52700-53000 to strengthen the bullish outlook. DAX can decline further towards 24500-24250. Nifty has managed to hold above 24000 but needs to break decisively above 24100 to extend its rally towards 24400-24600. Nikkei has rebounded sharply above 71000 and can rise further towards 73000-74000 while it remains above 69000. Shanghai has also bounced back and can advance towards 4200 in the near term.

Brent and WTI have declined in line with our expectations and remains vulnerable to further declines towards $70 and $65 respectively. Gold has slipped below $4000 and could extend losses towards $3900-$3800. Silver is testing a crucial support near $55, from where a bounce back towards $60 is possible; otherwise, a break lower could trigger a fall towards $50-$45. Copper has broken below $6.00 and can decline further towards $5.80-$5.75. Natural Gas remains range-bound between $3.00-$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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