Morning briefing: The US treasury yields are coming down as expected

Vikram Murarka Kshitij Consultancy Services

Softer US PPI yesterday after the softer CPI release earlier has kept the Dollar index subdued. Although the reading is bullish, the required volume to pull the index up seems to be missing. Most other currencies also look stable at levels seen in the previous session. Euro is stable below 1.1550, EURJPY below 184, Aussie above 0.70, Pound below 1.35, USDJPY above 159 and USDCNY below 7.50. EURINR is holding below resistance near 110.30 and needs a breakout for a fresh rally, while USDINR could trade below resistance at 95.50 and see a range of 95.50-95.30/10.

The US Treasury Yields are coming down as expected. The German Yields have also dipped back. Both the US Treasury and the German Yields have good support which can limit the current fall. We expect both the yields to sustain above their support and bounce back to resume their broader uptrend going forward. The 10Yr GoI is coming down within its range. We retain our bearish bias to see a downside break of its range and more fall.

Dow continues to trade within the broad 53000-55000 range with a downside bias towards 53000. DAX remains constructive and can rise towards 27000-27500 on a sustained break above 26500. Nifty is holding above the key 24350-24300 support zone and can recover towards 24500 in the coming weeks. Nikkei remains strongly bullish and can extend its rally towards 70000 and higher. Shanghai has weakened near the 3900 level and can decline further towards 3875-3850 in the near term.

Crude prices continues to soften while staying within broad ranges of $80-$95 for Brent and $75-$90 for WTI. Gold has corrected after failing to hold above $4500, but the broader bullish view remains intact above $4200 with scope to rise towards $4600 and higher. Silver has weakened in the short term, though the outlook remains positive for a move towards $70-$75. Copper remains under pressure and can decline further towards $6.50-$6.45. Natural Gas continues to hold above the key $2.60 support and can rise further towards $2.80-$3.00 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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