Morning briefing: Euro has an upside capped at 1.0450

Vikram Murarka Kshitij Consultancy Services

The major currencies witnessed sharp movements yesterday due to a significant rise in the Euro post stronger PMI release. The Dollar Index slipped to the low of 107.75 but has risen past 108 again. While above 108, targets of 110-111 remains intact in the near term. Euro has an upside capped at 1.0450 for now. Only a sustained rise past 1.0500 can negate the bearish outlook on it. EURINR can trade sideways between 88-89/90 for the near term. USDJPY has risen past 158 and if sustained, can head towards 160 or higher in the coming sessions. Pound and EURJPY have immediate resistances coming at 1.26 and 165 respectively, a strong break past which can take both higher in the near term. USDCNY can gradually head towards 7.35. USDINR had declined a bit on the NDF yesterday but we expect the downside to be limited to 85.70/65 and our target of 86 remains intact for now. Watch out for the US Trade Balance scheduled today.

The US Treasury yields remain higher and stable. View remains bullish and the yields can rise further going forward. The German yields are inching higher. A strong follow-through rise from here is needed to see an extended rise. Else there is a danger of falling back. The 10Yr GoI has declined sharply. View is bearish. More fall is on the cards.

The Dow Jones failed to sustain above 43000 and while below 43000-43500, the index could target a decline toward 42000-41800 in the near term. DAX has risen above 20200, and a follow-through rise could push the index higher toward 20500-20700, negating our earlier expectation of a fall to 19600/500. Nifty took a hit and fell to 23600 after two cases of HMVP were reported. It could fall further to 23500-23000 if follow-through selling is seen today. Nikkei surged above 40200 following reports that the US President may adopt less aggressive tariffs. If these gains are sustained, the index could target 41000-42000. Shanghai remains stable, hovering around 3200. While below 3250, it could decline further to 3150.

Crude and Copper prices have tested their immediate resistance levels. While these levels holds, a fall towards 73-73 (Brent), 71-70 (WTI) and 4.10-4.00 (Copper) respectively can take place in the near term. Gold, Silver and Natural Gas remain bullish and can target 2700-2750, 31.0-31.5 and 3.8-4.0 respectively on the higher side.

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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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