Morning briefing: EUR/USD drops below 1.1500 after Fed rate hike

Vikram Murarka Kshitij Consultancy Services

The Dollar index trades have risen sharply after the FED hiked rates by 25bps leading to a sharp decline in Euro below 1.15. USDJPY has risen along with the rise in the Dollar index and looks bullish in the near term while the EURJPY could also rise towards 180.50. Aussie and Pound have scope for an initial decline for the next few sessions. USDCNY continues to look bearish. USDINR could open with a gap up today and rise towards 96-96.50 in the near term.

The US Treasury Yields are holding higher. The outlook remains bullish, and there is room to rise more. The US Federal Reserve increased the interest rates by 25 bps yesterday in line with the market expectation. The Fed Fund rate now stands at 3.75%-4%. It has also kept the doors open for another 25 bps rate hike for this year. This can aid the yields to go further higher from here. The German Yields have dipped slightly. Support is there to limit the downside. The outlook remains bullish. The 10Yr GoI has come down. Any further dip from here can be limited. The upside remains open to see more rise before a reversal happens.

The Fed raised rates by 25bps, triggering a sharp fall in Dow towards 51609 before its recovery. DAX has bounced above 25500 and can target 26000. Nifty remains weak below 23500 and can decline towards 23000. Nikkei remains vulnerable below 65000, with downside towards 63000-62000. Shanghai faces resistance near 3950 and can remain range-bound between 3850-3950.

Brent and WTI have fallen sharply after a larger-than-expected US crude inventory build. Both need breaks above $110 and $105 for further gains. Gold needs to hold $4300 for a rise towards $4500-$4600. Silver remains positive above $63, while a break below $63 could drag it towards $60. Copper can rise towards $6.60-$6.70 while above $6.40. Natural Gas remains range-bound between $2.80-$3.00.

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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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