Morning briefing: Euro could be headed towards 1.1100

Vikram Murarka Kshitij Consultancy Services

Dovish comments from the FED officials signaled a higher rate cut possibility in September thereby taking the Dollar Index sharply down below 102. Powell’s Jackson Hole speech on Friday will be important to watch. The view is bearish towards 101 while below 102. Euro could be headed towards 1.11 or slightly higher. A lower EU CPI data release, if seen today can make the Euro stronger. The USDJPY and EURJPY tested 145.18 and 160.42 before bouncing back. Overall some corrective upmove is possible in the near term towards 150/152 and 164/165 within an overall downtrend. The Pound and Aussie are headed towards resistances at 0.6775/0.6850 and 1.30/3050 respectively from where a decline is possible. USDCNY can remain volatile within a region of 7.18-7.12. EURINR is likely to fall back towards 92-91.50 in the coming sessions while below resistance at 93. USDINR may attempt to dip to 83.85/80 or slightly lower on weakness in the Dollar. Thereafter, it may attempt to rise back towards 83.90/84.00.

The US Treasury yields are coming down in line with our expectation. A break below their immediate support can drag them lower in the coming days. In case the support holds, a consolidation is possible before the downtrend resumes. The German yields remain stable. The view is bearish and there is room for the yields to fall more. The 10Yr GoI is still stuck in a narrow range. The bias is bearish to break the range and fall more eventually.

Dow Jones has entered into the crucial resistance zone. Need to see if it break above it or fallback from there. DAX and Nifty remains bullish for the near term. Nikkei is attempting to break above its resistance and a sustained break above it could be further bullish in the near term. Shanghai has fallen back as the resistance at 2900 held well.

Crude prices remain bearish but have crucial support coming up, which if holds, can produce a bounce back in the medium term. Gold and Copper have scope to test 2600 and 4.25-4.27 on the upside before a fallback can be seen. Silver looks bullish towards 30-31. Natural gas has recovered sharply as it seems to be getting good support at 2.1 and while above it, a further rise can be seen towards 2.5 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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