Morning briefing: Euro has a bullish bias above 1.0550-1.0500

The Dollar Index can bounce back towards 107-108 while above 105.50. Euro has a bullish bias above 1.0550-1.0500. Markets await the ECB policy meeting on Thursday. A break past 1.0650 can take it higher to 1.0750 eventually. EURINR can remain ranged within 90-88 for now. Aussie has slipped below 0.64 and can get extended to 0.6350-0.6300 in the coming sessions while Pound needs to see a strong break past 1.2750 to head towards 1.28-1.30, else can continue to fall within its range of 1.2770-1.2450. USDCNY has bounced well and while above 7.25, we are retaining our view of seeing a rise towards 7.30-7.35 in the near term. USDJPY can attempt to rise towards 152-154. EURJPY remains bullish towards 162-163, while above 156. USDINR on the NDF is trading lower. For the current week, a range of 84.65/60-84.85 is projected to hold.

The US Treasury yields have declined after the jobs data on Friday. There is room to fall further to test their support first before a rise back happens again. The US NFP increased by 227K and the Unemployment rate rose to 4.2% (from 4.1%) in November. The German yields remain stable. There is limited room on the downside. We expect the yields to sustain above their immediate support and rise in the coming days. The 10Yr GoI has risen sharply after the RBI policy meeting outcome on Friday. A strong rise above the immediate resistance is needed to take the yield higher. Else it can fall back again. We will have to wait and watch. The RBI left the repo rate unchanged at 6.5%. However, the central bank cut the CRR by 50 bps from 4.5% to 4%. This cut will be implemented in two phases (25bps each).

The Dow Jones continues to trend lower, with a break below 44500 likely to accelerate the decline toward 43000. DAX rose to a high of 20425 before closing just below 20400. Caution is advised in the 20500-21000 zone, where a potential reversal could emerge. Nifty traded flat and closed slightly lower. A sustained rise above 24800 would pave the way for further gains toward 25000 while support at 24400 holds well. The Nikkei remains below the key resistance at 39500. While this resistance holds, a break below 39000 is needed to confirm a decline toward 38500-38000. The Shanghai Composite has breached the 3400 level and if sustained, it could extend gains to 3450-3500.

Crude prices have tested their immediate support levels and look ranged between 71-73 (Brent) and 67-69 (WTI) for some time. Gold, Silver and Copper hold below their immediate resistance levels and can fall towards 2630-2600, 31.5-31.0 and 4.1 respectively in the near term. Natural looks bullish towards 3.4-3.6.

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