Morning briefing: The Dollar Index can bounce back from 100.40

Vikram Murarka Kshitij Consultancy Services

Lower US CPI print for Jun-26 (in line with market expectations) has pulled down the Dollar Index against other major currencies today. The dollar index can bounce back from 100.40, but the dip over yesterday has led the Euro, Aussie, Pound, and Yen to strengthen against the dollar temporarily. All the mentioned currencies can again start to weaken in the coming days as the dollar index starts to rise again. EURINR may rise on the expected rise in the USDINR towards 96.50 soon, but we may expect a dip today. EURJPY may test 186 initially before falling back to 184. USDCNY fell as expected but now it can bounce back from 6.7550 towards 6.78/80 again. USDINR could see an initial dip today to 96-95.90/85 max, on dollar weakness within an overall bullish biad towards 96.50.

The US Treasury Yields have come down after the inflation data release. However, support is there to limit the downside. The broader bullish view remains intact and the upside remains open to see more rise. The US CPI fell sharply to 3.46% in June from 4.17%. This fall is mainly due to lower crude prices in June. There are chances for the CPI to rise again in July following the recent rise in Crude Oil price. The German Yields remain stable. The bullish view is intact, and the yields can rise more. The 10Yr GoI has risen back sharply contrary to our expectation. A further rise from here can take it higher and delay the fall that we have been expecting.

Global equities remain mixed. Dow can decline further towards 52000-51800 while below 53000. DAX has recovered from key support and is likely to remain within the 24800-25500 range. Nifty remains weak below 24100 and could decline towards 23800, keeping the 23800-24400 range intact. Nikkei needs a break above 69000 to extend its recovery towards 70000-71000. Shanghai has bounced back from recent lows but remains vulnerable to a pullback towards 3900-3850 while below 4000.

Brent and WTI can rise further towards $90 and $85 respectively. Gold continues to hold near the crucial $4000 support, keeping the broader $4000-$4250 range intact. Silver is likely to remain range-bound between $55 and $65. Copper has turned stronger after breaking above $6.30 and can rise further towards $6.40-$6.45. Natural Gas remains weak and can decline towards $2.85-$2.80 in the near term.

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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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