Morning briefing: Euro has moved up well above 1.1600

Vikram Murarka Kshitij Consultancy Services

The Dollar index has dipped and could test 99 while Euro has moved up well above 1.16 which if sustains can take it towards 1.1675. EURINR can test 109 before bouncing back to higher levels of 110.50 while the EURJPY is attempting to sustain above 186 which if succeeds can rise higher towards 188-189. USDJPY continues to trade within 159.70-160.70 region. Weakness in the dollar index if seen can pull down USDJPY towards 159.50-159. USDCNY looks bearish towards 6.75. Aussie and Pound can rise to 0.71-0.7150 and 1.3550 respectively from current levels with downside likely to be limited to 0.70 and 1.34 respectively. USDINR needs to sustain a break below 94.50 to decline towards 94.05 in the coming sessions. Our expectation of a rise to 95 mentioned yesterday may not happen.

The US Treasury Yields have come down again. They can dip further to retest their key support. Whether they manage to sustain above their support or not will determine the next direction of move. That may largely depend on the outcome of the Fed meeting tonight. Their economic projections will need a close watch to see their future policy path. The Bank of Japan increased the interest rate by 25 bps points yesterday. The German Yields are coming down in line with our expectation. They can fall more to test their support. The 10Yr GoI has turned down again failing to sustain the bounce. That keeps intact our bearish view to see more fall.

Global equities remain supported by positive risk sentiment. Dow has reached our expected level of 52500 and can rise further towards 53000. DAX remains constructive above 24500 and can advance towards 25250-25500. Nifty is holding above its key support near 23750 and could break above 24000 to rise towards 24250-24500. Nikkei has moved above 70000 in line with expectations and can extend gains towards 70500-71000. Shanghai needs a sustained break above 4100 to strengthen further and target 4125-4150.

Crude prices continue to weaken in line with expectations. Brent and WTI can decline towards $75 and $70 respectively in the near term. Gold remains below $4400, but the broader outlook stays positive for a rise towards $4500-$4600. Silver can extend gains towards $72-$74, while Copper remains bullish and can rise further towards $6.70-$6.75. Natural Gas has bounced back and is likely to remain within the broader $3.00-$3.50 range for some time.

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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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