Morning briefing: Euro can bounce back while above 1.1500

Vikram Murarka Kshitij Consultancy Services

The Dollar index surged to 100.109 after US NFP data came out higher than expected on Friday, posting 172k and thereby raising chances of a rate hike by the FED. But we may expect a dip from anywhere between 100.10-100.50. Euro can bounce back while above 1.15 to prevent further decline to 1.14. EURINR and EURJPY have risen from Friday’s lows and have scope to rise in the near term towards 111 and 185/185.25, respectively. USDJPY continues its slow uptrend while USDCNY may rise to test 6.80/83 before facing rejection from there again towards 6.77. Aussie and Pound can rise to 0.71 and 1.34+ from current levels. USDINR fell sharply on positive measures by the RBI and the Indian government to induce foreign capital inflow, but whether that weighs over the overall strength in the US Dollar will have to be seen. But we may expect a higher spot towards 95.25/30 at least, if not more.

The US Treasury Yields have risen sharply after strong jobs data release on Friday increased the hopes for a rate hike. The US NFP rose by 172K (Market Expectation: 95K) and the unemployment rate remained stable at 4.3% The rise is getting support from oil price rise in the early trades today. A break above the immediate resistance can boost the momentum and take the yields higher. The chances of the fall indicated last week have been negated. The German yields are struggling to get a strong follow-through rise. That keeps them vulnerable to fall from here. We will have to wait and see. The 10Yr GoI has dipped further. It can fall more in line with our expectation before reversing higher.

Global equities remain under pressure. Dow and DAX are weakening in line with expectations and can decline further towards 50500-50000 and 24250-24000 respectively. Nikkei has fallen sharply amid Middle East uncertainty and higher interest rate expectations, with scope for a further decline towards 63000. Shanghai also remains weak below 4000 and can fall towards 3900-3850. Nifty is relatively resilient and can rise towards 23,600 while holding above 23,200.

Crude prices have opened higher after Friday's decline, and the broader outlook remains positive for a rise towards $100 in the coming weeks. Gold and Silver have turned sharply weaker following stronger-than-expected US jobs data and can decline further towards $4300-$4200 and $65-$60 respectively if current weakness persists. Copper has broken below key support and may fall towards $6.20-$6.00. Natural Gas has pulled back from recent highs, but the downside appears limited to $3, with a broader $3-$3.50 range likely to hold 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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