Morning briefing: The Dollar Index extended the fall to the low of 105.85

Vikram Murarka Kshitij Consultancy Services

The Dollar Index extended the fall to the low of 105.85 but has recovered from there and now has a scope to bounce back towards 108-110 in the medium term. Euro and EURINR below 1.06 and 89.50, look bearish in the medium term. Aussie and Pound have gained strength but still, a decisive break past 0.655 and 0.67 will be needed to become further bullish. USDCNY has declined below 7.25 and now needs to see whether it rises back past 7.25 again or extends the fall towards 7.20 in the coming sessions. The Dollar Yen has slipped below 155-152 region but while above current levels, can attempt to rise back within the mentioned range. EURJPY is coming off in line with our view and can soon test 158-156, while below 164/162. USDINR has bounced well as anticipated and is likely to remain ranged between 84.20-84.50 in the near term.

The US Treasury yields continue to fall and are keeping intact our bearish view. The yields have room to fall and test their support. The price action around the support will need a close watch to see if a bounce is happening or not. The US PCE data release came in line with market expectation at 2.3% (YoY) for November, up from 2.1% (for October) The German yields remain weak and are coming down as expected. View remains bearish to see more fall. The 10Yr GoI can dip in the near-term before going up towards the upper end of its range. The broader picture remains bullish to break the range and rise.

The Dow Jones tested the key resistance at 45000, briefly rising to 45003 before closing lower. Below 45000, a decline towards 43000 and eventually towards 42000-41000 is anticipated. DAX continues to trade weaker, with strong support in the 19000–18800 region likely to push the index towards 20000. Nifty is holding above 24000 but continues to show weakness in its attempt to rise past 24400. A sustained rise beyond 24400 is essential to extend gains towards 24500–24700 else can drag it lower to 23800. The Nikkei reversed from a low of 37801.62 and is now trading above the 38200 mark, supported by the critical level of 37700. It could retest 38500-39500 if it continues to rise. The Shanghai Composite hovers above the interim resistance of 3300 and could rise towards 3350–3400. However, failure to hold above 3300 could lead to declines towards 3250 or even 3150, consistent with earlier projections.

Crude prices can fall to their immediate support levels before a bounce back is seen in upcoming weeks. Gold and Silver hold above their immediate support levels and can rise towards 2700 and 31.5 respectively in the near term. Copper has risen but can range between 4.20-4.05. Natural Gas has fallen sharply but if the immediate support at 3.1 holds a rise towards 3.4-3.5 can be seen in the near term.

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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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