Morning briefing: The Yen is overall in depreciating mode

Vikram Murarka Kshitij Consultancy Services

Fresh attacks reported in the Strait of Hormuz have led the Dollar to gain against most major currencies. Rise in the Dollar Index towards 101.50-102 can drag the Euro down to 1.1350-1.13. The Yen is overall in depreciating mode, targeting 163/164. EURJPY is headed towards 186, triggered by Yen weakness. USDCNY can face rejection from 6.81/8250 to fall towards 6.77/76 in the medium term. EURINR remain bearish and could decline if support at 108 on the cross and 94.75 on USD/INR fail to hold. Aussie and Pound decline towards 0.69 and 1.33 on Dollar gains.

The US Treasury Yields have risen sharply to test their resistance much faster than expected. The rise in oil price has pushed the yields higher. A follow-through rise from here can take the yields much higher from here. The German Yields have also risen sharply. While this rise sustains, they can rise more and the fall-back move expected earlier may not happen. The 10Yr GoI has bounced slightly. But resistance can cap the upside and drag them lower again.

Global equities have come under pressure as renewed Middle East tensions and fears of supply disruptions weighed on market sentiment. Dow and DAX can decline further towards 52500-52000 and 25000 respectively. Nifty may see a gap-down opening, but support near 24250 could trigger a bounce back towards 24600-24800. Nikkei is likely to trade within the 67500-73000 range unless it breaks below 67500. Shanghai has turned weak after breaking below key support and can decline further towards 3950-3900.

Crude prices have rebounded sharply on renewed supply disruption fears following reports of attacks on vessels near the Strait of Hormuz. Brent and WTI can rise further towards $80-$85 and $75-$80 respectively. Gold remains under pressure and can decline towards $4100-$4000 while resistance near $4200-$4250 holds. Silver has turned weak below $65 and can fall towards $55. Copper remains constructive despite the recent dip and can rise towards $6.30-$6.40. Natural Gas is likely to remain range-bound within the broader $3.00-$3.50 range.

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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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