Morning briefing: The US treasury yields have dipped further
The Dollar Index tested 98.95 before turning lower. The range of 99-96 is holding well for now, but we maintain our bullish bias towards 101. The Euro and EURINR are attempting to rise back but while below 1.17 and 101, the view remains intact to see a fall towards 1.15-1.14 and 99-98 respectively. EURJPY above 172 has a scope to rise towards 175 in the near term. USDJPY and USDCNY have the scope to rise towards 150 and 7.20 or even higher levels, while they trade above 147/46 and 7.16 respectively. The Aussie and Pound have bounced a little but the upside is likely to be capped at 0.655-0.660 and 1.35-1.36 respectively. USDINR has risen past 86.05 and if sustained, can head towards 86.15-86.25 or even 86.50 in the coming weeks. US Housing starts data release is scheduled today.
The US Treasury yields have dipped further. But support can limit the downside and keep the outlook positive. The yields can rise back going forward. The German yields are coming down to test their support. We expect the support to hold and the yields to bounce back to keep the broader bullish view intact. The 10Yr GoI has come down towards the lower end of its narrow range. We expect the range to remain intact and the yield to rise within it.
The Dow Jones has risen after a better than expected Retail sales data. While above 43500, there is scope to test 45000 soon. Thereafter it has to be seen if he index can manage to rise further or decline from there. Dax has risen sharply on news of the US-EU natural gas deal. Dax can initially test 24500, a break above which if seen can take it to 25000. Nifty may continue to trade within the 25000-25400 range for now. Nikkei has tested the upper level of our expected 39000-40000 range and if 40000 holds well, Nikkei may fall towards 39500 in the next few sessions. Shanghai has risen well and can target 3550-3600 while above 3500.
Crude prices continues to trade firm above key support levels, with potential to rise towards $72–$74 (Brent) and $70–$72 (WTI). Precious metals remain bullish, with Gold eyeing $3,400–$3,450 and Silver targeting $40–$41. Copper holds above $5.50, with chances of a bounce to $5.65–$5.70 unless it breaks lower. Natural gas stays strong above $3.50, supporting a move towards $3.65–$3.70.
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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.
