Morning briefing: The US treasury yields have declined sharply

Vikram Murarka Kshitij Consultancy Services

The Dollar Index could fall toward 97–96 if it fails to hold 98 and rise past 99. EURUSD has risen past 1.17 and if sustained, can test 1.18 or even 1.19 as well. Only a break below 1.16 can bring back the lower targets of 1.15/14 into picture. EURINR is headed towards the resistance coming between 103.00-103.50 region. EURJPY can target 178 or even 180 while it trades above 175-174. USDJPY needs to see a bounce from 150, else it can get dragged towards 148 as well. USDCNY continues to consolidate between 7.14-7.12. While the Aussie is trading near the lower end of its 0.660-0.645. The Pound can rise towards 1.35-1.36 levels, while it sustains above 1.34. USDINR is trading at 88 on the NDF. While above 87.70, a further rise to 88.25 and above looks possible.

The US Treasury yields have declined sharply. The fall is happening in line with our expectations. The yields can fall more from here. The German yields remain lower and stable. Failure to rise back immediately can drag them lower. The 10Yr GoI has bounced back. But a strong follow-through rise is needed from here to go further higher and avoid a fall back.

The Dow fell sharply below 46000 amid concerns over bad loans at regional banks and could weaken further towards 45000 if it fails to recover. DAX remains stable above 24000, likely to trade within 23600-24500 in the near term. Nifty has broken above the crucial 25500 level, and sustained trade above it could signal a fresh bullish breakout. Nikkei looks positive and may move towards 49000 while holding above 48000. Shanghai is likely to remain range-bound between 4000-3800/3750, with a break above 4000 needed to confirm medium-term bullishness.

Crude prices fallen sharply after the EIA report showed an unexpected rise in US crude inventories and record-high production. Brent could decline further towards $60, while WTI may extend its fall towards $56 in the near term. Gold remains bullish after testing a new high near $4347, with potential to rise towards $4400 or even $4500-4600 if momentum continues. Silver faces strong resistance near $53.77 and could see a sharp reversal towards $50-48 if it holds. Copper remains range-bound between $4.9-5.2, while Natural Gas is holding support at $2.9 and could rebound towards $3.0-3.1 unless it breaks lower towards $2.8-2.7.

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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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