Morning briefing: The US treasury yields have come down sharply

Vikram Murarka Kshitij Consultancy Services

Surge in crude prices yesterday led to a sharp rise in yields, leading to a stronger US Dollar, but crude prices have dipped today, giving a relief correction on the Dollar Index, thus giving the other currencies some scope for appreciation against the US Dollar. Euro holds above 1.12, while USDJPY and EURJPY can test 157 and 186 respectively before rebounding from there. EURINR looks bullish to 109-109.50, while USDCNY can continue to fall towards 6.69. USDINR can have scope to test 96.50 before rising back towards 97.

The US Treasury Yields have come down sharply. They can fall further from here. However, support is there to limit the downside. We expect the Yields to resume their broader uptrend after testing their support. The German Yields have inched up slightly. But they can still fall back and test their support first before resuming their broader uptrend. The 10Yr GoI continues to move up. The outlook remains bullish, and there is room to rise more. However, intermediate corrections cannot be ruled out.

Dow and DAX remain weak below 51500 and 25000, with downside towards 50500-50000 and 24600-24500. Nifty remains near crucial support at 22200-22300, with a break below this zone opening downside towards 21700-21600. Nikkei remains weak below 68000 and can decline towards 67500-67000. Shanghai remains weak below 3800 and can fall towards 3700.

Brent and WTI remain bullish, with potential upside towards $105-$110 and $95-$100, respectively, amid escalating US-Iran tensions and rising freight costs. Gold could rise towards $4300-$4400 if support holds, while a break below $4100 could trigger a fall towards $4000 or lower. Silver needs to sustain above $60 to target $63-$65; otherwise, further downside is likely. Copper could rise towards $6.80-$6.85 while holding above $6.50. Natural gas may test $3.00, where its ability to hold or break lower will determine the next direction.

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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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