Morning briefing: Euro has scope to dip to 1.1600

Vikram Murarka Kshitij Consultancy Services

The Dollar Index has dipped within 99-98 region driven by Yen strength while Euro has scope to dip to 1.16. The EURINR has dipped and needs to sustain above 110 to rise further else can be dragged down to 109-108 region. EURJPY and USDJPY may trade within 182-184 and 157-159 region respectively. USDCNY has dipped too and could test 6.81 before bouncing back again towards 6.8550. Pound has dipped below 1.36 and could have scope to test 1.35/34 while Aussie can test 0.7250 before facing any rejection towards 0.71. USDINR needs to fall back below 94.75 and lower to head towards 94.50/30 else can rally to 95.30/50.

The US Treasury Yields have risen back sharply thereby reducing the chances of the dip to test their support. Bullish view is intact. They can rise more going forward. The German Yields have also reversed higher. Though the outlook is positive to see more rise. But it is not clear whether they can rise from here itself or after some more dip. The 10Yr GoI is managing to hold higher. A strong follow-through rise is needed from here to go higher. We will have to wait and watch.

Global equities remain under pressure as renewed Middle East tensions weigh on sentiment. Dow can decline further towards 48500-48000, while DAX may stay range bound between 23500-25000. Nifty is also likely to trade within a broad 24500-23500 range after failing to hold higher levels. Nikkei remains capped below 60000 and may decline towards 59000-58500. Shanghai remains closed for Labor Day and will reopen tomorrow.

Crude prices have rebounded sharply on renewed geopolitical tensions. Brent may trade within $100-$120 and WTI within $95-$115 until clearer direction emerges. Precious metals remain under pressure with Gold likely to decline towards $4500 and Silver towards $70. Copper has weakened and may stay range bound between $6.00-$5.80. Natural Gas can continue to trade 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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