Morning briefing: Euro is weak towards 1.0800 ahead of the ECB policy meeting
The Dollar Index is bullish towards 104 and the Euro is weak towards 1.08 ahead of the ECB policy meeting where markets expect a 25bps rate cut. USDJPY and EURJPY are struggling to rise and could stabilize or fall towards 146.50 and 160 respectively. The fall could be delayed in case of a rate cut by the ECB today. Aussie needs to sustain trade above 0.67 to rise back towards 0.68 or higher while Pound trades just below 1.30 and needs to move back to prevent further decline to 1.29. USDCNY and USDINR face resistance near 7.1240 and 84.12 respectively and while that hold, the pairs can attempt to dip towards 7.08/05 and 83.90 respectively in the near term. EURINR needs to bounce back from 91 to prevent a sharp fall to 90 else could be bearish for the next few sessions.
The US Treasury yields remain stable. A further fall from here can drag them down in the coming days. We will have to wait and watch. The German yields have come down below their support. While this break sustains, the yields can fall more. That will negate our earlier bullish view. The ECB meeting outcome today will need a close watch. We expect the rates to be unchanged in this meeting. The 10Yr GoI retains its range. The sideways consolidation can continue for some more time before a rise is seen.
Dow Jones has risen above 43000. While it holds above 42500/600, a rise toward 44000 can be expected. Whereas, DAX, Nifty, and Nikkei have extended the losses and broken below 19500, 25000, and 39000, failure to rise above the mentioned levels would take the indices further down to the support levels of 19200-19000 for DAX, 24800/750 for Nifty, and 38000 for Nikkei. On the other hand, Shanghai has held the support of 3200 and could move up slowly within the range of 3200-3300.
Crude prices remain lower. Brent and WTI can fall towards 71/70 and 68/67 respectively in the near term. Gold can fall within the narrow range of 2700-2640/2620 while below resistance near 2700. Silver and Copper have risen slightly, Silver can target 32.5-33.5 on the higher side while Copper remains bearish towards 4.30-4.25 in the near term. Natural Gas needs to break below 2.35 to confirm further bearishness towards 2.2-2.1.
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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.
