Morning briefing: Fed is widely expected to keep interest rates unchanged

Vikram Murarka Kshitij Consultancy Services

The US FOMC is scheduled today and even though the Fed is widely expected to keep interest rates unchanged, focus will be on any hints of rate cuts in the coming months. Dollar Index failed in its attempt to see a sustained rise past 99 and started declining from 99.14 itself. Currently, it is back within the 99-96 range but we retain our view of seeing a rise towards 101. The Euro and EURINR have upside capped at 1.1650-1.1700 and 102 respectively and while below these levels, the targets of 1.14 and 99 are kept alive. EURJPY, USDJPY and USDCNY are likely to consolidate within 171-174, 149-146 and 7.20-7.14 region in the near term before a break happens on either side. The Aussie and Pound have bounced a bit from their respective supports coming around 0.65 and 1.33. Overall, the range of 0.645-0.665 and 1.33-1.35 can persist in the near term. USDINR is currently trading at 87.0610 but faces an immediate resistance at 87.10. Need to see whether the resistance holds and pushes the pair to 86.50 or extends the rise further. US ADP Employment and US GDP data releases are also scheduled today.

The US Treasury yields have declined sharply. A further fall from here will negate our view of seeing a rise and in turn will drag them lower going forward. The US Fed meeting outcome tonight will need a watch. The central bank’s comment on the future rate path and the impact of tariffs will be much more important to hear today. The German yields continue to move up. The bullish view is intact, and there is room to rise more. The 10Yr GoI has come down. The outlook remains mixed and range bound.

The Dow Jones trades in the negative as investors seem cautious before the FOMC meeting today, where interest rates are expected to remain unchanged. Dow could continue to trade within 44500-45000 region for the near term. Dax and Nifty have risen well, recovering from their losses and preventing further declines to 23500/23000 and 24400 mentioned yesterday. Now, both indices can move up towards 24800 and 25000-25250, respectively. Nikkei is holding above crucial support at 40000, above which an eventual rise towards 41000-42000 remains intact. Shanghai has risen well and can soon target 3650-3700, while above 3550-3600.

Brent and WTI have surged on news of the EU’s $750 billion U.S. energy purchase and $600 billion investment, along with President Trump’s accelerated timeline for ending the Russia-Ukraine war, raising supply concerns. Gold continues to rise towards $3400–$3450, while Silver holds above support at $38 with potential to move towards $39–$40. Copper shows a temporary rebound but remains bearish towards $5.4–$5.3, and Natural Gas stays bearish, targeting $3.10–$2.70 unless it breaks above $3.25/30.

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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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