Morning briefing: Major currency pairs are expected to trade mostly sideways

Overall, major currency pairs are expected to trade mostly sideways with a few bearish Dollar signals emerging. The Dollar Index may remain confined near 100-99, after rising to 99.726 initially on comments from Warsh of a hike in interest rates if inflation does not cool off while EURUSD, USDJPY, EURINR, EURJPY, Aussie, Pound, USDCNY, and USDINR are all hovering near important support or resistance levels that will determine their next directional moves.

The US Treasury Yields have risen sharply on Friday. The Fed Chairman Kevin Warsh’s speech at the Jackson Hole symposium has raised the hopes for a rate hike and pushed the yields higher. The 10Yr is at the top of its range. Need to see if the expected bullish breakout is happening now or not. The German Yields are also moving up in line with our expectation. Crucial resistance is ahead and the price action around it will need a close watch for a possible reversal. The 10Yr GoI is going up as expected. There is room to rise further to test its resistance. Thereafter the yields can reverse lower.

Dow is weakening below 54000 and can remain within the 53000-54000 range. DAX remains positive above 26500 and can rise towards 26750-27000. Nifty continues to face downside risk towards 24000 or lower unless it sustains above 24300, which would revive the bullish outlook towards 24600-24800. Nikkei has reversed and remains at a crucial support near 65000, with a bounce towards 67000-68000 possible if it holds. Shanghai is likely to remain range-bound between 3850-4000 while below 4000.

Crude prices have moved higher, while Brent and WTI are likely to remain within the broad $80-$95 and $75-$90 ranges respectively. Gold and Silver have corrected sharply following the Fed meeting and its hawkish stance, but can bounce towards $4600-$4700 and $70 or higher respectively while key supports hold. Copper remains range-bound between $6.50-$6.80, with a sustained break below $6.50 opening the way towards $6.40-$6.20. Natural Gas has reversed after testing $3.00 and can decline further towards $2.80-$2.70 while below this level.