Morning briefing: The US treasury yields have risen sharply after Oil prices

Vikram Murarka Kshitij Consultancy Services

Concerns of continuation of the US-Iran conflict as stated by President Trump has led to a 100% chance of a Dec-rate hike of 50bps as per the CME Fedwatch tool. The DXY has risen above 103 and heads towards 104 now while the Euro trades below 1.11. A rise above 1.11 is needed in the near term to avoid further decline towards 1.10. Dollar-Yen has tested 160 but trades slightly lower today. Sustained dip from here can take it towards 159-158 in the coming days else a rise back towards 160-160.50 and beyond could still be seen. EURINR is likely to move up while above 104. USDCNY is bearish. The Aussie and Pound could rise in the near term while above 0.68 and 1.32 respectively. USDINR moved up to close above 94 yesterday and can hold to rise towards 94.20/30 in the near term.

The US Treasury Yields have risen sharply after oil prices start to move up following Trump’s comments that said a deal with Iran was not needed. The CME’s FedWatch tool now shows 100% odds of a Dec-rate hike of 50bps as the market sentiment may now shift to the fact that the Middle East tensions may not end so soon. The US 10YR and the 30YR trades higher and could inch up slowly in the near term while the crude prices move higher. The German and the 10Yr GOI Yields are also trading higher and look bullish for the near term.

Global equities look vulnerable, with the Dow facing a decline towards 51,600 on a decisive move below 52,000 and the DAX towards 26,000 while below 27,000. Nifty needs to hold 25,000 to rise towards 25,800-26,000. Nikkei needs a sustained break above 62,000 to rise towards 64,000, else it risks a sharp decline towards 57,000. Shanghai needs to hold above 3,650 to rise towards 3,750, else it can slip towards 3,600.

Crude oil prices bounced back but remain vulnerable. Brent and WTI could decline toward 90–85 and 85–80, respectively, in the near term. Gold plunged below 3900, leaving it torn between breaking 3850 toward 3800–3700 or rebounding toward 4000–4100. Silver fell to key support at 50, where a breakdown risks dragging prices toward 48–45. Meanwhile, Copper dropped sharply and stays vulnerable toward 6.10–6.00, while Natural Gas faces immediate weekly resistance near 3.4 that could trigger a pullback toward 3.0 unless broken for a rally toward 3.6–3.8.

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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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