Morning briefing: The Euro has scope to test 1.16/17.00 while above 1.15

Vikram Murarka Kshitij Consultancy Services

The Dollar index may dip to 99.5-99 on a break below 99.75 while the Euro has scope to test 1.16/17 while above 1.15. Markets expect a 25bps rate hike by the ECB today. EURINR looks bearish below 111 towards 110-109, while the EURJPY could test 186 while above 185. USDJPY continues its slow uptrend to 161 while USDCNY looks bearish towards 6.76/75 while below resistance at 6.80. Aussie and Pound can rise to 0.71-0.7150 and 1.35 respectively from current levels. USDINR dipped to 95.0850 yesterday. There is scope for a further dip to 95-94.80 while below 95.50.

The US Treasury Yields have risen back well. The inflation data release has aided this bounce back. However, the yields have to rise past their immediate resistance in order to gain strength and go further higher. The US CPI rose 4.17% (YoY) in May from 3.78% in April. High inflation is likely to aid in limiting the downside for the Treasury Yields going forwards. The German Yields have moved up. A further rise from here can take them higher and will avoid the chances of falling back. The ECB meeting outcome today evening will need a close watch. The 10Yr GoI has bounced back well from its support. Need to see if it is getting a strong follow-through rise from here to avoid the danger of seeing an extended fall. We will have to wait and watch.

Global equities remain under pressure following higher US CPI and renewed Middle East tensions. Dow and DAX have weakened sharply and could decline further towards 49500-49000 and 23500 respectively if key support levels are broken. Nikkei has turned bearish after breaking below 64000 and can fall further towards 62000. Shanghai continues to weaken in line with expectations and may decline towards 3900-3850. Nifty remains relatively stable but needs to hold above 23150 to recover towards 23400 over the week.

Crude prices have rebounded on renewed geopolitical tensions and can rise further towards $100 in the coming weeks. Gold has weakened sharply after falling below $4200 and could decline further towards $3900-$3800 if it breaks below $4000. Silver remains bearish and can extend losses towards $62-$60. Copper has also turned weak and may decline further towards $6.10-$6.00. Natural Gas is holding above $3.00 and is likely to remain within the broader $3.00-$3.50 range for some time.

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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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