Morning briefing: Euro needs to rise past 1.0850 to bring 1.0900/1.0950 into picture
|The FED kept the rates unchanged at 5.25%-5.5% in their Policy meeting yesterday and hinted that a rate cut in September is possible if inflation continues to cool down, while the BOJ went ahead with a 15-bps rate hike to 0.25%, leading to a volatile FX market as anticipated. Dollar Index slipped to 103.86 and if does not rise back above 104 immediately, can target 103 in the near term while Euro needs to rise past 1.0850 to bring 1.09/0950 into picture. USDJPY and EURJPY have plunged and could be vulnerable to test lower supports of 145/144 and 160/158 respectively if the current momentum of fall continues for a few more sessions. USDCNY tested 7.21 before rising back from there. A decisive break past 7.25 will be needed to head towards 7.27/28 on the upside. The Aussie and Pound below 0.66 and 1.29 respectively can be bearish for a fall towards 0.6400 and 1.28. USDINR could see a pull back to 83.67/65 or even 83.60 but it could be short lived. Our medium term view of a rise to 83.80/90 remains intact but. EURINR needs to rise past 91 to turn bullish.
The US Treasury yields have declined sharply. The yields have some support near current levels which must hold to avoid a deeper fall and produce a bounce back. The German yields continue to fall. The break below their support sustains well and that leaves the outlook bearish now to see more fall from here. The 10Yr and 5Yr GoI remain stable. While the immediate outlook is unclear, a near-term corrective rise is a possibility before the broader downtrend resumes.
Dow Jones, DAX and Nikkei rose after the FOMC meeting. However, Dow Jones and Nikkei have come off, failing to sustain a rise. Nifty upside could be limited to 25150-25200. Shanghai can fall back while the resistance at 2950 holds.
Brent, WTI, Gold, Silver and Copper have risen sharply too. Natural gas looks mixed just now, but our view will remain bullish as long as it holds above 2.0-1.9.
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