Morning briefing: EUR/USD could head towards 1.1600

Vikram Murarka Kshitij Consultancy Services

The Dollar index has not been able to sustain above 100 and has fallen back to head towards 99, while the Euro has bounced back and could head towards 1.16 or higher soon. EURINR looks bearish below 111, while the EURJPY could test 186 while above 185. USDJPY continues its slow uptrend while USDCNY looks bearish towards 6.76/75 as it could not rise to test 6.80 on the upside. Aussie and Pound can rise to 0.71 and 1.35 from current levels. USDINR rose sharply yesterday to 95.69 but may come off sharply today again as the RBI has announced USDINR FX Swap for FCNR deposits (at 0%) and for ECBs raised by the PSUs (at 1.5%) in line with the measures announced on Friday to attract foreign capital. This should be positive for the Rupee and could take it towards 95-94.50.

The US Treasury Yields continue to move up. As mentioned yesterday, a rise above their immediate resistance can strengthen the momentum and take them higher. The German Yields have moved back up. If this sustains, then more rise can be seen. That in turn can negate the danger of them falling back. The 10Yr GoI is coming down much faster than expected. It has room to fall further from here.

Dow is holding above key support near 50700 and could bounce back, but a break lower would open the way towards 50500-50000. DAX remains weak and can decline further towards 24250-24000, while Nikkei has resumed its decline and may fall towards 63000. Shanghai continues to look bearish below 4000 and can decline towards 3900-3850. Nifty can recover towards 23400 while holding above 23000.

Crude prices have weakened contrary to expectations, but the key question remains whether they break below $90 or hold and resume their rise towards $100. Gold and Silver remain under pressure below $4400 and $70 respectively, keeping the downside open towards $4300-$4200 and $65-$60. Copper has rebounded from recent lows and, while above $6.20, can recover towards $6.50-$6.60 instead of falling towards $6.00. Natural Gas has dipped, but the downside appears limited to $3.00, with a broader $3.00-$3.50 range likely to hold for now.

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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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