Morning briefing: EUR/USD inches higher with room to test 1.1700-1.1735

Vikram Murarka Kshitij Consultancy Services

The Dollar Index has slipped below 99.45 and can drift towards 99-98, while EURUSD is inching higher with room to test 1.17-1.1735 before a medium-term pullback. EURINR looks firm above 102.50 and may rise to 104.5, and EURJPY is testing resistance at 180 where rejection can send it towards 178-176 unless a sustained break pushes it to 182-184. Dollar-Yen sits in a tight 155-154 band that could trigger a move to either 156-158 or 152 once broken. USDCNY is holding support near 7.0950 with a chance of a bounce, Aussie remains capped at 0.6580 within its range, Pound stays vulnerable to 1.30 while below 1.3250, and USDINR continues to trade inside 88.50-88.85 with downside opening only on a break below 88.50.

The US Treasury yields are continuing to move up and have come close to the upper end of their range. We will have to wait and see if the expected bullish breakout is happening now or not. The German yields have also risen back sharply and are just below their key resistance. A strong break above this resistance will negate our earlier bearish view. The 10Yr GoI is holding well above its support and can rise more from here.

Most indices have declined on the ending of the longest ever US government shutdown as now concerns look around the FED's rate cut decision for Dec-25. The Dow and DAX have scope to test 47000 and 24000-23500 before bouncing back in the medium term. Nifty ended in the positive yesterday and could test 26000 before declining from there. Nikkei and Shanghai have declined. While Nikkei can trade within 49000-52000 for the near term, Shanghai can remain within the 3950-4050 region.

Crude prices bounced against expectations as the US government’s reopening lifted sentiment, but Brent still looks vulnerable below $65 and WTI below $62, keeping the broader view intact for a dip towards $60 and $56. Gold is holding firm after testing $4250 and can push towards $4300-4350 with the downside now limited to $4000, while Silver needs a sustained break above $54 for a move to $55-56 or else risks slipping back to $51-50. Copper is likely to stay range-bound between $5.20 and $4.90. Natural gas continues to rise in line with expectations with room to head towards $4.70-4.80.

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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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