Morning briefing: Euro is headed towards 1.1800

Vikram Murarka Kshitij Consultancy Services

Donald Trump announced a trade deal with Japan in which both countries agreed to a 15% tariff rate. The Dollar Index is gradually coming off within its 99-96 range. The downside is expected to be limited to 96. The Euro and EURINR are headed towards 1.18 and 101.50 respectively. EURJPY is trading near 172 and failing to see an immediate recovery above the current levels can drag it towards 170 initially. USDJPY can test the support near 146 soon. USDCNY is trading lower within its 7.20-7.16/15 range. The Aussie and Pound have immediate resistance at 0.66 and 1.35/36 respectively, thereby suggesting limited upside. USDINR observed the high of 86.4150 yesterday. A crucial resistance is coming at 86.50 which can be tested before eventually coming down. US Existing Home Sales data release scheduled today.

The US Treasury yields are at their support. They can rise back either from here itself or after a little more dip from here. The German yields have dipped below their support contrary to our expectation. Failure to rise back from here can drag them lower and will negate the rise that we have been expecting. The ECB meeting outcome tomorrow will need a close watch. The 10Yr GoI is bouncing back and keeps intact the narrow range.

The Dow Jones has moved up and can test 45000 in the near term before facing a decline. The Dax fell sharply, unable to sustain above 24500. Now, if it fails to sustain trade above 24000, it can fall towards 23500-23000 in the coming days. Nifty has also fallen sharply, holding below the 25200-25250 resistance zone. Failure to hold above 25000 can drag it lower to 24800-24600 in the coming days. Nikkei is rising slowly and has scope to test 41000 initially before a rejection is seen. Shanghai has risen to test our expected 3600. A further rally can take it to 3650 before a pause is seen.

Crude prices have dipped as expected and remain weak unless they bounce above $69 (Brent) and $66 (WTI) respectively. Gold faces resistance at $3,450 with potential for a dip to $3,400–$3,350 before rallying to $3,500–$3,600. Silver remains strong and could head towards $40–$41. Copper is holding firm with scope to rise to $5.85–$5.90. Natural Gas is falling but could bounce from support at $3.20–$3.10.

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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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