Morning briefing: The US Treasury yields have come down sharply

ECB hiked key rates by 25bps with a hawkish tone for inflation and expected weaker economic growth owing to higher energy prices and weaker confidence. It is likely to keep rates unchanged in its July-26 meeting. Although the rate hike was as expected and is positive for the Euro in the near term, weaker growth expectations have kept the Euro strength limited just now. A consolidation within 1.15-1.16 looks possible for the near term. The Dollar index may rise while above immediate support at 99.50. EURINR could be bearish while below immediate resistance near 110.75/111. EURJPY could test 186 before rejection while USDJPY is headed towards 161. USDCNY looks bearish towards 6.76/75 while below 6.78. Aussie can rise to 0.71-0.7150 while Pound can move to 1.3250 before rising back towards 1.3550. USDINR needs to hold below 96 for hopes of a decline towards 95.50/95 to keep alive.

The US Treasury Yields have come down sharply. A fall in oil price after the US calling off the strikes on Iran has dragged the yields lower. The yields can fall more from here to test their support. Thereafter a bounce is possible again. The German Yields have also come down failing to sustain the bounce. That keeps the door open to see more fall again. The ECB raised the interest rates by 25 bps in its meeting yesterday. The rate hike was in line with market expectation and was already priced in the market. So, it did not aid the yields to go higher. The 10Yr GoI has turned down again. That keeps it vulnerable to break the immediate support and see an extended fall.

Global equities have rebounded sharply as easing Middle East tensions and improving risk sentiment supported markets. Dow, DAX and Nikkei have recovered from recent lows and can extend gains further in the near term. Shanghai has opened with a gap up and can rise towards 4050-4100 while above 4000. Nifty remains above key support near 23150 and can bounce back towards 23400-23600 if the positive sentiment persists.

Crude prices remain under pressure as easing Middle East tensions have reduced concerns over supply disruptions. However, a rebound towards $95-$100 remains possible if current support levels hold. Gold and Silver have bounced back sharply after testing key support levels. The downside may be limited for now, with scope for a recovery towards $4300-$4400 and $70-$72 respectively. Copper has also rebounded from support near $6.20 and can rise towards $6.50-$6.60. Natural Gas continues to hold above $3.00 and is likely to remain within the broader $3.00-$3.50 range.