Morning briefing: Euro slides from peak, eyes 1.1700 support

Vikram Murarka Kshitij Consultancy Services

FED Chair Jerome Powell said that the Fed is taking a patient approach to further interest rate cuts, but didn't rule out a reduction. The Dollar Index has held the support near 96 for now. A further rise within its immediate range of 96-98/99 is possible. The Euro on the other hand is coming off from the high of 1.1829 and can test the support near 1.17 before attempting to rise back. EURINR needs to see a decisive rise past 101 to turn bullish in the near term. EURJPY on a break past 170 can head towards 175, else a corrective to 168-166 can happen. USDJPY below 144 can get dragged towards 142-140. Only an immediate rise past 144 can negate the fall. USDCNY has deeper support at 7.15/14, while it holds, the pair can attempt to rise back towards 7.18 or higher. The Aussie and Pound continue to hold below the respective resistances near 0.66 and 1.38 and are likely to fall further in the near term. USDINR is trading within a narrow range of 85.75-85.45. Overall, while below 86, the targets of 85.25-85.00 are kept open for now. US ADP Employment data release is scheduled today.

The US Treasury yields have bounced slightly. But it is likely to be short-lived as the resistance ahead can cap the upside. The yields are likely to fall back and keep the bearish view intact. The German yields have reversed lower as expected. The resistances have held well in line with our expectation. The yields can fall more from here. The 10Yr GoI is falling within its range. The expected bullish breakout of the range is getting delayed.

The Dow Jones seems to be in a strong uptrend and is headed towards 45000-46000 while above 44450. Dax, on the other hand, has continued to decline and could test 23500 soon. Thereafter, failure to hold above 23500 can extend its fall to 23000-22800 before a sharp rebound comes in. Nifty has been stable yesterday but has scope to rise towards 25800-26300 while above support at 25400. Nikkei continues to see profit taking on concerns of US-Japan trade negotiations and could extend its fall to a maximum of 38500 before rebounding higher in the medium term. Shanghai could consolidate between 3415-3465 region for the near term before extending its rise in the longer run.

Crude prices are holding above support and could rebound towards $70–$72 and $68–$70 respectively. Gold and Silver remain firm and may rise further to $3,400 and $37.5 respectively. Copper faces resistance at $5.15, and while below it, could dip to $5.00. Natural Gas remains weak and a sustained break below $3.40 may trigger a fall to $3.00, though a bounce to $3.60 is also possible if support holds.

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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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