Morning briefing: EUR/USD down towards 1.1300-1.1200 in the medium term

Vikram Murarka Kshitij Consultancy Services

The Dollar index trades above 101 and the Euro near crucial support at 1.14. The Dollar index will have to rise above 101.50 to turn bullish and pave way for 102-104 dragging Euro down towards 1.13/1.12 in the medium term. Else we may expect the paths to reverse from current levels. EURINR can test 107.77-107.50 before bouncing from there while EURJPY may hold within 183-186 region for now. USDJPY tested 161.928 and has fallen back from there. It could test 161 soon. USDCNY can test 6.78 before coming off towards 6.76/75 again. Aussie looks bearish to 0.69 while Pound has already plunged to levels below 1.3250 and needs to bounce back to avoid further decline. USDINR may move higher towards 95 on Dollar strength and Euro weakness.

The US Treasury Yields have moved up further. That keeps the bias positive to go further higher from here to test their key short-term resistance. The German Yields have dipped again. Failure to rise back immediately can drag them to test their support again. That in turn will delay our expected rise. The 10Yr GoI continues to remain stuck in a narrow range. It can fall further from here before a sustained reversal is seen.

Dow and DAX need to break above 53000 and 25500 respectively to target higher levels; otherwise, they remain vulnerable to a pullback. Nifty continues to hold above 24000 and needs a break above 24200 to rise towards 24400. Nikkei has seen a sharp correction after testing recent highs but remains constructive above 70000, with scope for a bounce back towards 73000-74000. Shanghai remains the strongest among the major indices and can extend its rally towards 4250-4300 if it breaks above 4200.

Crude prices continue to decline in line with expectations. Brent and WTI remain bearish and likely to fall further towards $75-$70 and $70-$65 respectively. Gold and Silver also remain under pressure and can decline towards $4100-$4000 and $60 before a meaningful reversal is seen. Copper has tested key support near $6.25-$6.30, and while this region holds, the possibility of a bounce back towards $6.50 remains intact. Natural Gas continues to trade within the broader $3.00-$3.50 range and is likely to remain range-bound 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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