Morning briefing: Euro can hold 1.0775-1.0850/09 range in the near term

Vikram Murarka Kshitij Consultancy Services

The Dollar Index tested 104.636 on stronger US Case Schiller and Consumer Confidence data but came off thereafter. Only a sustained rise past 104.50 can take it higher towards 105-105.50. Overall, the view remains bearish towards 103.00-102.50. Euro, Pound and EURINR have risen well within the respective ranges of 1.0775-1.0850/09, 1.2900-1.3150 and 90.50/90-91.50 which can hold in the near term. The expected rise in USDJPY and EURJPY to 155 and 168 cannot be fully ruled out until a strong break below current levels is seen. Aussie can fall towards 0.65 if the ongoing fall continues further. USDCNY tested our initial target around 7.1436 before coming down. Until further clarity in the view, the target on the upside remains at 7.1751 while a fall if seen can drag it towards 7.10 or even lower. USDINR, above 84.06 can rise towards 84.10/12. Watch out for the US ADP Employment and US GDP data release scheduled today.

The US Treasury yields have dipped slightly. But broadly the yields are likely to rise further from here before resuming their downtrend. The US PCE (2.37% (YoY) in September) data release tomorrow will be important. A low PCE number can drag the yields lower. The German yields have risen further and are keeping intact our bullish view. There is room to rise more from here. The 10Yr GoI sustains higher. Outlook is bullish and the yields can rise further from here.

Dow Jones failed to rise past 42500 and closed lower. As long as it stays above 42000–41800, the outlook remains positive for the index to move higher towards 43500–44000. DAX failed to sustain above 19600 and keeps an immediate range of 19300-19600 intact. A break above 19600 will eventually bring in a rise towards 19800-20000. The Nifty initially declined to a low of 24140.85 before recovering to close above 24400. Downside risks remain intact for a decline towards 24000 while below 24600. The Nikkei has held steady above 39000, maintaining a bullish outlook towards 40000. Meanwhile, the Shanghai Index has dipped below 3300 and continues to trade within the 3250-3350 range.

Crude prices continue to fall and can target interim support levels in the near term. Gold and Silver have risen, Gold can have a small correction to 2750 before continuing its uptrend, while Silver can march further higher towards 35.0-35.5. Copper can remain ranged for upcoming sessions before breaking higher towards 4.5-4.6. Natural gas can target 2.5-2.2 on the downside while below 3.

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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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