Morning briefing: EUR/USD can test 1.1350-1.1300

Vikram Murarka Kshitij Consultancy Services

Fresh attacks between US and Iran over the weekend and Iran calling the Strait of Hormuz closed has led to a stronger Dollar against major currencies. We expect Dollar Index to fluctuate within 100.40-102 for the coming sessions while Euro can test 1.1350/1.13 on a break below 1.1370. The markets await the US CPI data release today. EURINR holds support near 108.70 and may rise towards 109.50 if it holds; else it can fall back to 108. USDJPY has risen above 162, keeping our medium term target of 163/165 intact while EURJPY may remain confined within 183-186 zone unless a decisive breakout occurs. USDCNY could retest 6.7850/6.80 if it sustains the rise from current levels due to fresh dollar strength. Aussie and Pound are likely to remain range-bound within 0.68-0.70 and 1.33-1.35, respectively, while USDINR looks bullish above the 95-94.90 floor, targeting 96 eventually. India CPI is also expected to release higher today.

The US Treasury Yields have risen back well as expected. Oil price rise has taken the yields higher. The US Yields have room to rise more in the coming days. The US CPI data release tomorrow will need a close watch. The German Yields have dipped. But supports are there to limit the downside and push them higher again. The 10Yr GoI has come down. A further fall from here may negate the rise that we had expected earlier and drag it down from here itself.

Global equities remain under pressure as renewed Middle East tensions continue to weigh on market sentiment. Dow remains vulnerable to a decline towards 52000-51800 while below 53500. DAX is testing key support near 25000 and can fall further towards 24800-24500. Nifty may see a gap-down opening but is likely to remain within the 23800-24400 range while support near 23800 holds. Nikkei is testing the crucial 68000 support, while Shanghai remains weak below 4000 and can decline further towards 3925-3900.

Commodities have turned mixed as renewed Middle East tensions have lifted crude prices, while abundant US gas supplies continue to weigh on Natural Gas. Brent and WTI can rise further towards $85 and $80 respectively. Gold and Silver are likely to remain range-bound within $4000-$4250 and $55-$65 respectively. Copper continues to face resistance near $6.30 and could trade within the $6.00-$6.30 range. Natural Gas has turned weak below $3.00 and can decline further towards $2.85-$2.80.

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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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