Morning briefing: The US Treasury yields remain lower

Vikram Murarka Kshitij Consultancy Services

The BOE delivered a 25 bps rate cut, lowering the policy rate to 3.75%, while the ECB kept its policy rate unchanged at 2.15%. While below 98.50, the targets of 97.50-97.00 are kept open in Dollar Index. EURUSD is trading lower within the 1.18–1.17 range. EURINR can test 105.50 before attempting a rebound. EURJPY has scope to move towards 184–185 in the near term. USDJPY is expected to remain range-bound between 154 and 158 for some time; markets will closely watch the BOJ meeting scheduled today. USDCNY can extend its decline towards 7.025 or even 7.00 while below 7.045. AUDUSD may slip towards 0.655–0.650 while trading below 0.665–0.670. GBPUSD can consolidate within the 1.330–1.345 region before a breakout occurs. USDINR is likely to trade within the 90–91 range for a while. US Existing Home sales data release is scheduled today.

The US Treasury yields remain lower and vulnerable to fall more in the coming days. They need some strong trigger to gain strength and break their resistance to go up. The German yields sustain higher. View remains bullish, and there is room to rise more. The 10Yr GoI is stuck inside a narrow range below its resistance. Immediate outlook is mixed. A decisive rise above the resistance is needed to go higher and avoid falling back. Wait and watch.

The Dow and DAX have risen but the Dow has closed below 48000 while the DAX has managed to close just below 24200. Both indices will have to move up from here to prevent decline back to 48000-47000 and 24000-23500 levels. The DAX can head towards 24500 on a break above 24200. Nifty is likely to rebound from 25600-25500 and bounce back towards 26000 or higher. Nikkei has risen well above 49000 today and needs to sustain the upmove to prevent falling back towards 48000-47000. Above 49000, the view is bullish towards 50000-51000. Shanghai continues trade within the 3800-3950 region.

Brent and WTI remain weak and can fall further towards $57–$55 and $52–$50 respectively. Gold needs a sustained break above $4400 to rise towards $4450–$4500. Silver’s broader bullish outlook towards $68 remains intact for now. Copper may stay range-bound between $5.6-$5.3. Natural Gas faces further downside towards $3.85–$3.80 after rejection near $4.21.

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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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