Morning briefing: Euro is coming off but has limited downside near 1.1300-1.1200
President Donald Trump withdrew his threats to fire Federal Reserve Chair Jerome Powell. The Dollar Index rose to 99.64 and declined a bit. Now it faces resistance at 99.60/65; a break could lead to 100-100.50, else a decline toward 98-96 is likely. The Euro and EURINR are coming off but has limited downside to the support near 1.13-1.12 and 96-95. Eventually, the pairs can rise towards 1.16-1.18 and 99 respectively. EURJPY is holding the range of 160-164 for now. USDJPY has bounced from 139.88 and can trade within 140-144 region for a while. AUDUSD is trading near the crucial level of 0.64. Need to see whether it sustains above it or breaks below. The USDCNY has risen as anticipated and can attempt to rise back towards 7.32-7.35. Pound appears peaked at 1.3423 itself and if the fall persists can extend further to 1.32-1.30 in the coming sessions. USDINR can limit the downside to 85.00-84.85 and start rising. US New Home Sales data release is scheduled today.
The US Treasury yields have come down. The expected rise seems to be not happening. Failure to bounce back from here can drag them lower in the coming days. The German yields have dipped further. Outlook remains bearish. The yields have room to fall more. The 10Yr GoI is hovering above a crucial support. A strong rise is needed from here to avoid the danger of seeing a deeper fall.
US Stocks rebounded overnight as Trump hinted at a possible reduction of tariffs on China following a deal and said he has no plans to fire the FED chair J.Powell. Dow moved up from 37830 and can now test 39700/39800 while the rise sustains. A break above 39800 can be further bullish to 40500/800. Dax needs to sustain above 21000 to move up towards 22000/22300 else it could be vulnerable to test 20000. Nifty traded higher yesterday and while above 24000/23850, view is bullish towards 24500/25000. Nikkei has opened with a gap up and looks bullish towards 35000-36000 in the medium term. Shanghai looks subdued today but could see a slow rise towards 3350-3400 in the near to medium term.
Crude prices remain below resistance, suggesting short-term consolidation within $68–$62 (Brent) and $65–$60 (WTI) ranges. Gold has retreated from its all-time high and may correct further towards $3,100 if it stays below $3,500. Silver is range-bound between $33.5–$32.0 with potential to rise later. Copper is trending up, but needs to break $5.00 to target $5.20; else a pullback is likely. Natural Gas is holding support, with chances of moving up to $3.40 unless it breaks below $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.
