Morning briefing: Pound stumbles at critical juncture, bearish pressure mounts

Vikram Murarka Kshitij Consultancy Services

The Dollar Index remained stable yesterday above 103, while EURUSD continues to move within 1.09-1.0950 region. The USDJPY and EURJPY had risen a bit but while below 148/148.50 and 162/163 respectively, they can resume their downtrend in the medium term. Pound is holding below the immediate resistance around 1.2780/28 and failure to rise past current levels, can trigger a fall towards 1.26. The Aussie needs to break above 0.66 to turn bullish, else can remain ranged within 0.66-0.6450/64 for some time. USDCNY can attempt to rise towards 7.20 if it sustains above 7.18. EURINR could test the supports near 91.50 and 91 before possibly bouncing back towards 92. USDINR could see a dip to 83.85/80 before attempting to rise back towards 84 again in the medium term. Watch out for the US PPI release scheduled today.

The US Treasury yields have dipped further. The reversal after testing the resistance is sustaining well. That keeps intact our bearish view of seeing more fall from here. The US CPI data release tomorrow will be important to watch. The German yields remain lower and stable. The downtrend is intact, and the yields have more room to fall. The 10Yr GoI is still stuck inside the narrow range. The bias is bearish to break the range on the downside and fall eventually.

Dow Jones has dipped slightly but still has chance of seeing a test of 39800-40000 on the upside before turning lower from there. DAX and Nikkei has scope to rise to 18000-18200 and 37000 before a fall back can takes place. Nifty to trade within 24500-24000 range for a while. Shanghai remains vulnerable to break below 2850 and fall towards 2835-2800.

Brent and WTI have risen sharply yesterday following the escalating tensions in the Middle east as there are fears that Iran could attack Israel. Gold, Silver and Copper have bounced back well and look bullish for the near term. Natural Gas has dipped slightly but downside could be limited to 2.1-2.0.

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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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