Morning briefing: Euro weakens past 1.0450, focus shifts to 1.0350

Vikram Murarka Kshitij Consultancy Services

Trump confirmed that his proposed 25% tariffs on Mexico and Canada will take effect on Mar 4. Dollar Index has risen past 107 and can head towards 108 as well. Euro has broken below 1.0450 and price action around 1.0350 would be important to see whether it holds or falls further. EURINR is nearing the lower end of its range of 91.50/92.00-90.50. USDJPY has limited upside to 152 and target of 148 is kept open for now. EURJPY is trading near the crucial support at 156. AUDUSD and Pound can fall towards 0.62/61 and 1.25 respectively in the near term. USDCNY tested 7.28 and now can extend the rise towards 7.30 if sustained above current levels. USDINR tested 87.40 on the upside. Now a break past 87.50 if seen, can take it higher at 88. Else, can fall back towards 86.90. US Personal Income and US PCE data releases scheduled today.

The US Treasury yields have declined further sharply. They have dipped just below their key support. Failure to rise back can drag them lower in the coming days. The US PCE data release today will be important to watch. The German yields remain lower but stable. While they sustain above their immediate support, the bias will remain positive to see a rise going forward. The 10Yr GoI remains stuck in its narrow range. The immediate outlook continues to remain unclear.

The Dow has fallen below 43280 and looks bearish towards 43000-42000. DAX needs a follow-through rise to keep the bullish view to 23000 alive. Else it could break below 22000 and fall to 21700-21500. Nifty remains stable and is holding the range of 22500-22700; our preferred view is to see a rise past 22700 towards 23000. Nikkei, contrary to our view, after being in the range of 38000-40000 since Oct-24, has given a breakout on the downside and is nearing 37000. Going ahead, while below 38000, a fall towards 36000-35000 looks possible. Shanghai is trading slightly lower could come down the support of 3350-3330, while the support holds a rise towards 3400-3450 remains on the table.

Crude prices have rebounded sharply due to expectations of U.S. tariffs on Canada and Mexico. A range of $76-$72 (Brent) and $72-$68 (WTI) is expected to hold for some time. Gold and silver remain weak, but the outlook remains positive, with a potential rise towards $3000 and $32.5-$33.0, respectively. Copper and natural gas are expected to rise towards $4.7-$4.8 and $4.2-$4.4, respectively, in the near term.

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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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