Morning briefing: EUR/USD is headed towards 1.1300

Vikram Murarka Kshitij Consultancy Services

Victory of the Democrats in the US midterm election results has kept the downward pressure on the Dollar Index intact as it trades below 101.50. It may slip to 101 and a break below if seen could be bearish for the near term towards 100.35. Tomorrow’s US NFP needs a close watch. EURUSD Is headed towards 1.13 before a reversal is possible from there while the Dollar-Yen may ease towards 157. EURJPY could rise to 179 on a sustained break above 178 else can fall back towards 177/176 while the Pound, Aussie and the Chinese Yuan trades strong. USDINR may test support near 94.50 and break it to head towards the phycological level of 94. Thereafter, it needs to be seen if a rebound happens or the spot breaks lower.

The US Treasury and the German Yields have come down in line with our expectation. Indeed, the fall in the Treasury Yields seems to be much faster than expected on the back of the mid-term election results. Both the Treasury and the German Yields can dip further to test their support and then reverse higher again. The 10Yr GoI has declined below its support. We had expected it to bounce from that support. While this break sustains, the yield can fall more from here.

Global equities have turned risk-on after the US midterm results, with the Dow and DAX looking strong above 52,000 and 26,000, and upside towards 53,800-54,000 and 27,000. Nifty remains strong and needs to sustain near 24,300 to move towards 24,400-24,600. Nikkei needs to hold above 60,000 to recover towards 62,000 or higher. Shanghai has turned firmer and can rise towards 3,750 or higher while it sustains above 3,600.

Crude Oil prices have turned bearish, with further downside potential. Brent may decline towards 85–90 and WTI towards 80–85. Strong Middle East exports continue despite the ongoing US-Iran conflict. Meanwhile, gold and silver have rebounded sharply. Gold targets 4,200–4,250 above 4,000, while silver eyes 54–55. Copper remains vulnerable below 6.45–6.50, targeting 6.25. Natural gas is likely to remain range-bound between 2.7 and 3.2.

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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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