Morning briefing: The Dollar Index and Euro remains ranged while USD/JPY can rise slowly towards 159.00

Vikram Murarka Kshitij Consultancy Services

The Dollar index and Euro remains ranged while the USDJPY can rise slowly towards 159 and EURJPY can test 178. EURINR could have limited downside and could soon bounce back in the coming sessions, while USDCNY could trade sideways for sometime while above 6.69. USDINR is likely to open with a gap down today as the NDF quotes 96.14 just now. It is to be seen if it can trigger a sustained decline below 96 in the medium term. This is after the RBI came in with measures to curb dollar demand and ease pressure on the USDINR. The measures are: a. A special dollar window for Indian Oil, BPCL and HPCL, to meet daily dollar requirements b. Reduction of underlying exposure threshold of $100mln to $5mln for rupee derivative transactions c. Restriction on rebooking of cancelled rupee-linked derivative contracts and d. Bank requirement to maintain a 20% reserve against specified large forex derivative transactions and increase the cost of such positions.

The US Treasury Yields remain lower but stable. Supports are there to limit the downside from here. The broader bullish view remains intact. The yields can rise more going forward. The German Yields can dip further from here and test their support. Thereafter the overall uptrend can resume. The 10Yr GoI continues to move up. The bullish view is intact. The 10Yr GoI has more room to rise. Any intermediate dips can be short lived.

Dow and DAX have moved above 51500 and 25000, with upside towards 52000-52500 and 25400 if they sustain. Nifty needs a sustained move above 22750 to turn bullish towards 23000, else the risk of 22300 remains. Nikkei remains weak below 70000 with downside towards 67500-67000. Shanghai remains weak below 3900 and can fall towards 3700.

Brent and WTI have dipped but could remain within ranges of $100-$110 and $85-$100, respectively, as long as immediate support levels hold. Gold and silver have bounced back in line with expectations and could rise towards $4300-$4400 and $63-$65, respectively. Copper could rise towards $6.80-$6.85 in the near term, while natural gas could trade within a range of $3.00-$3.50 as long as it sustains above $3.00.

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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.

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