Morning briefing: Euro continues to trade within the 1.1550-1.1700 region
The FED cut the rate but 25 bps thereby bringing the FFR at 4%. Dollar Index, Euro & EURINR continues to trade within 99.50-98.50, 1.1550-1.1700 & 102-103 region respectively for now. EURJPY & USDJPY have bounced a bit and if sustained above current levels, can attempt to test our earlier mentioned targets of 178-179 & 153.50-154.00. Watch out for the BOJ policy meeting scheduled today wherein the market expects the central bank to keep the rate unchanged at 0.50%. USDCNY has moved below 7.10 and can now head towards 7.075 in the near term. The Aussie can extend the gains towards 0.665-0.670 as long as it stays above 0.655. The Pound has recovered well from the low of 1.3140 and if sustained, can test 1.33 in the near term. USDINR can trade within 88.00-88.50 region for sometime.
The US Treasury yields have risen sharply after the Fed meeting outcome. A 25-bps rate cut came in from the Fed as expected. However, Powell sounding a little doubtful about delivering another 25-bps rate cut in December has aided the yields to rise. A strong follow-through rise breaking above the immediate resistance can take the yields much higher going forward. It will also negate the last leg of fall that we had expected. The German Yields remain stable. They have to rise from here immediately in order to avoid a fall. The 10Yr GoI remains stable in a narrow range.
The FED cut rates by 25bps as expected but has signalled no more rate cuts this year. Dow have up its initial gains and fell sharply. Unless an immediate rebound is seen, it can fall further to 46500. Dax, Nikkei and Shanghai have also dipped but could limit its downside to 24000, 50000 and 3900. The ECB is expected to keep rates unchanged today. Nifty has moved up. View is bullish to 26500 while above 25750.
Crude prices have seen a slight recovery yesterday but can remain weak and decline towards $63 (Brent) and $59 (WTI) respectively in the near term. Gold tested a high of $4046.20 and Silver rose to $48.51, but both remain vulnerable to declines towards $3850-3800 and $45-44 respectively. Copper is showing strength, attempting to break higher above $5.20/25 with potential to reach $5.30-5.40. Natural Gas continues to drift lower and may extend its fall towards $3.70-3.60.
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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.
