Morning briefing: Euro continues to hold the 1.1250-1.1400 range

Vikram Murarka Kshitij Consultancy Services

The FED kept the interest rates unchanged at the target range of 4.25% to 4.5% but the risks of higher unemployment and higher inflation have risen. The Dollar Index and Euro continues to hold the range of 100.50-99.00 and 1.1250-1.14 region respectively. EURINR on a confirmed break past 96.50 can head towards 98-99 as well. Else, can continue to trade within 95.0-96.5 region. EURJPY and USDJPY are trading lower within their range of 164-160 and 145-140 respectively. AUDUSD has risen well and while above 0.645/640 the target of 0655-0.660 are kept open in the near term. The USDCNY above 7.20 can rise back towards 7.30 again. Pound can broadly trade within 1.32-1.35 region for a while. USDINR tested 84.93 yesterday. While below 85, a fall back towards 84.50 can happen. Watch price action closely around current levels. BOE meeting is scheduled today wherein the market expects a 20 bps rate cuts.

The US Treasury yields continue to remain lower. This increases the chances of seeing more fall going forward rather than rising back. The US Federal Reserve kept the rates unchanged as expected. The central bank has also said that it will not be in a hurry to cut rates without assessing the impact of tariffs. As such the chances are high now for the rates to remain unchanged at this level for some time. The German Yields have declined sharply from near their resistance. That keeps the broader downtrend intact. The yields can fall more in the coming days. The 10Yr GoI continues to oscillate up and down within its narrow range. We will have to wait for the range breakout to determine the next direction of move.

Dow Jones has risen contrary to our expectation of a dip to 40000. While above 40700, we keep chances of a possible rise to 42000-42200 alive. Dax has dipped and has scope to decline further towards 22500/400 before resuming the broader uptrend. Nifty rose yesterday holding well above 24200. We may expect a rise to 24600 and a range of 24200-24600 to hold for sometime. Nikkei and Shanghai look bullish towards resistance near 37000 and 3400 respectively.

Brent and WTI have fallen as expected and may decline further towards $58–$56 and $56–$54 respectively. Gold remains bullish above $3,300 with potential to rise to $3,500, while Silver, holding above $33, could move up to $33.50–$34.50. Copper, despite a pullback from $4.80, stays positive above support with targets of $5.00–$5.20. Natural gas has rebounded as expected and may rise further to $3.80–$4.00 in the near term.

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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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