Morning briefing: The Dollar Index holds above 106.50, the near term looks bullish towards 109.00-110.00

Vikram Murarka Kshitij Consultancy Services

While the Dollar Index holds above 106.50, the near term looks bullish towards 109-110. EURUSD on the other hand appears bearish towards 1.03-1.02 and any rise if seen can be limited to 1.055-1.060. EURINR has a scope to rise towards 89-89.50 above 88 . Aussie and Pound failed to sustain their rise and started falling again. The overall view remains bearish for both in the near term. USDCNY has finally risen past 7.25 and if sustained can head towards 7.27-7.30 in the coming sessions. The Dollar Yen is trading within its 155-152 region but overall, the view is bullish towards 157-158 in the near term. EURJPY appears bearish towards 160-158 in the coming sessions while below 164/162. USDINR fell sharply yesterday but has immediate support around 84.20 which if holds can take it back towards 84.35/40 in the near term. Watch out for the US Case Schiller, US New Home Sales, US Consumer Confidence data releases scheduled today.

The US Treasury yields have come down sharply. The resistance has held very well and the yields can now fall further in line with our expectation. The US PCE data release is due tomorrow. If the PCE shows an uptick like the CPI, that could support the yields to rise back again. We will have to wait and watch. The US PCE (YoY) is currently at 2.2% (October). The German yields have declined further. That negates our earlier bullish view. The yields can now fall more from here. The Indian 10Yr GoI is holding well above its intermediate support. It can rise to test the immediate resistance now. Bias is bullish to break the resistance eventually and rise going forward.

The Dow Jones extended the rise to a record high of 44815 before easing a bit. However, we remain cautious as 45000 may cap the upside for the near term leading to a fall towards 42000/41000. DAX and Nifty also continue to move higher. DAX needs to breach 19600 to hit the target of 20000 while Nifty needs to see a follow-through rise in the next few sessions to hit 24500/24700 while it sustains trade above 24000. Nikkei, on the other hand, failed to sustain above 38500 and plunged and tested support of 38000 by marking a low of 38020 before recovering to the current level. While it holds above 38000, it's likely to hold the range of 38000-39500. Shanghai is holding above 3250; an attempt to move higher towards 3350 looks possible.

Crude prices plunged on the anticipation of a potential Israel-Lebanon cease-fire agreement. A further fall towards 71 (Brent) and 67 (WTI) can be seen in the near term. Gold and Silver have fallen but while the immediate support levels hold, a bounce towards 2650-2700 and 31.5-32.0 respectively looks likely in the upcoming sessions. Copper looks ranged between 4.20-4.05 for some time. Natural Gas has fallen but bias is bullish towards 4.6-4.8.

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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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