Morning briefing: Euro has dipped below 1.1700

Vikram Murarka Kshitij Consultancy Services

The Dollar Index trades slightly higher but still within the 98-99 region while Euro has dipped below 1.17. FED kept key rates unchanged yesterday while the markets await the ECB policy rates today. On the Euro we may expect the broad 1.1650-1.18 region to hold for the near term. The EURINR is likely to rise towards 111-112 while the EURJPY and USDJPY may remain broadly ranged within 186-188 and 157.50-160.50 region respectively. USDCNY is headed to 6.855 from where a rejection can be possible. Pound and Aussie are likely to bounce back from the lower end of the respective ranged of 1.3430-1.36 and 0.7250-0.71 in the near term. USDINR needs to fall back below 94.75 to head towards 94.50/30 else a straight rise to 95-95.25 cannot be negated.

Overall the bond yields look bullish for the near term, as they have started to rally this week. The Fed kept key rates unchanged as expected but the US yields have rallied on sharp rise in crude oil prices triggering concerns for a higher inflation and weaker growth. The US Treasury Yields look bullish for now with scope of some more rise from current levels. The German yields have also risen significantly ahead of the ECB policy meeting due today. The German yields can also continue to move up for the rest of this week. The 10Yr GOI yield has scope to test 7.05/10% while above 6.99%.

Dow has weakened below 49000 and can decline further towards 48500-48000. DAX can see a deeper fall towards 23500-23000 if it sustains below 24000. Nifty remains relatively strong above 24000 and can rise towards 24400-24600. Nikkei stays vulnerable below 60000 with downside towards 59000-58500. Shanghai has turned stronger than expected and may extend gains towards 4125-4150 in the near term.

Crude prices remain highly volatile but strongly supported by ongoing Middle East supply disruptions. Brent can bounce towards $115-$120 while above $100, and WTI may rise towards $115-$120 on a break above $110. Precious metals remain weak with Gold vulnerable towards $4550-$4500 and Silver towards $70 before any bounce back. Copper is soft but may remain range bound within $6.00-$5.80 while support holds. Natural Gas is likely to continue trading within the $2.80-$2.55 range for now.

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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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