Morning briefing: Euro can test the support around 1.0770/50 again

Vikram Murarka Kshitij Consultancy Services

The Dollar Index moved up a bit on good US Durable goods Data on Friday. The upside looks capped at 105-105.50 region and either from current levels or upon testing the target, it is likely to fall back towards 103.00-102.50 in the medium term. Euro, on the other hand, can test the support around 1.0770/50 again before bouncing back stronger. USDJPY and EURJPY extends the rise further as the Prime Minister Shigeru Ishiba's Liberal Democratic Party lost its parliamentary majority. If the rise extends further, a test to 155 and 168 looks likely to happen in the near term. Aussie could be headed towards 0.65, while below 0.66. Pound remains stable within 1.2900-1.3150 region. USDCNY looks a bit uncertain for now but has room on the upside towards 7.1436 and 7.1751. Failure to sustain above current levels can drag it down towards 7.10 or even lower. USDINR is likely to remain ranged within 84.00-84.12 for the week. EURINR can trade within the range of 90.50/90-91.50 for a while.

The US Treasury yields have risen back well above their resistances. That keeps the door open for the yields to rise more from here before resuming their downtrend. The German yields sustain higher. The outlook is bullish, and the yields can move up in the coming days. The Indian 10Yr GoI has risen towards the upper end of its current range. We expect the yield to break the range on the upside and continue to rise going forward. We will have to see if the range breakout is happening now or not.

The Dow Jones tested support at 42000 and is holding above it. While it sustains above the 42000-41800 support region, the outlook is positive with a potential to rise towards 44000. The Dax holds firm above 19400 and as long as it stays above the 19200-19000 support zone, it appears bullish towards 19800-20000. Nifty dropped below 24200. Further, it needs to hold above 23900-24000 to move higher else can head towards 23800/500 on the downside. The Nikkei has risen sharply as the Liberal Democratic Party lost its majority in Japan elections. If the rally continues, it could soon test 39500-40000 by the end of this week. Shanghai faced selling pressure above 3300 and buying pressure around 3200/3250 through last week. Price action around 3300 would be important to watch with an immediate range of 3250-3350 likely for this week.

Crude prices have dipped today but seem to be holding above supports of 71.50 (Brent) and 67.83 (WTI). While the supports hold, a rise towards 75-76 (Brent) and 71-72 (WTI) looks possible. Gold and Silver look bullish towards 2800 and 35.5 respectively while above their immediate support levels of 2700 and 33.5. Copper could be narrowly range between 4.4-4.3 for some time. Natural Gas needs to hold above 3 to see further bullishness towards 3.5-4.0 eventually, else can fall back towards 2.8-2.5. Watch price action near 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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