Morning briefing: Pound's rally hinges on a sustained 1.3000 rise
The FED kept the interest rates unchanged at 4.50%. The lower targets of 103-102 are kept open in Dollar Index, while it trades below 104. The Euro needs to rise above 1.0950 to head towards 1.10/11. EURINR has risen well from the low of 93.80 but still a rise past 95 is needed to take it higher at 97, else it can be vulnerable to fall towards 93 or lower. USDJPY has been coming off as anticipated and the range of 151-146 can hold for now. EURJPY has slipped below 162 and if the fall continues further, can get extended to 160 as well. AUDUSD can trade within range of 0.64-0.62. Pound tested 1.30 and now a confirmed rise past it can bring 1.35 into picture. USDNCY is trading lower within broad region of 7.26-7.22. USDINR has slipped below 86.50 and on the NDF it is currently trading near 86.35. While below 86.50, fall can extend towards 86.25-86.00. Watch out for the US Philifed Index, US Current Account & US Existing Home Sales scheduled today.
The US Treasury yields have come down further. The resistances have held very well, and the fall is happening now. View remains bearish. The US Federal Reserve meeting has largely turned out to be a non-event. The Fed kept the rates unchanged at 4.25%-4.5%. However, it has revised the growth forecast down to 1.7% from 2.1% for 2025. The inflation is also revised higher to 2.7% from 2.5%. The German yields have dipped slightly. Supports are there to limit the downside and keep the broader uptrend intact. We expect the German yields to resume its uptrend going forward. The 10Yr GoI continues to fall. The bearish outlook is intact. The yields can fall more from here.
The Dow Jones has risen well but closed below 42000. As long as the index stays below 42000-42200, the outlook remains bearish towards seeing a fall to 40000-39000. DAX needs a rise past 23500 to clear the way for a rise towards 23800-24000. Nifty is heading towards testing the resistance. Nikkei has fallen below 38000, while below this level it can come down to 37000. Shanghai is heading towards testing the support of 3400-3380.
Crude prices can continue to trade within a narrow range until a breakout on either side takes place. Gold, Silver and Copper faces near term resistance; a break above could push them higher, while failure may lead to a decline. Natural gas has rebounded as anticipated and may rise further to $4.40 while holding above $4.00.
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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.
