Morning briefing: Dollar Index rejection from 103.80-104.00 can limit a fall in Euro

Recent fluctuations in the forex market have been majorly dominated by the Japanese Yen which weakened over yesterday and today after Uchida’s comments on holding rates, aiding a recovery in the Dollar Index from 102.15 seen earlier during the week. However, the Dollar Index can face rejection from 103.80-104 which can limit a fall in Euro to 1.0850 and an upside for USDJPY and EURJPY to 148-150 and 161/163 respectively. Pound could test interim support at 1.26 while the Aussie can test 0.6580-0.66 in the near term. USDCNY is headed towards 7.20. EURINR could have supports near 91.50 and 91 which can hold and take the pair back towards 92. Bulls are holding on to USDINR over the last 2-sessions and unless a pullback to 83.80 is seen today, the bulls could take the pair soon towards 84+ levels. Watch for price action in the near term with immediate support at 83.80. All eyes will be on the RBI policy meeting today which can keep the pair volatile.

The US Treasury yields continue to move up in line with our expectation. Key resistances are ahead. We expect the yields to fall back after testing the resistance. The German yields have bounced well. Though there is room to rise, the broader trend will remain down and the yields are likely to come down again. The 10Yr and 5Yr GoI have fallen back. The expected corrective rise is not happening, and the yields can fall from here. The outcome of the RBI meeting today will be important to watch.

Dow Jones and Nifty lacks strength to rise and remains bearish for a fall towards 38200 and 23500-23300. DAX is seeing a corrective rise as expected. Nikkei has dipped slightly but the broader outlook will remain bullish while above the support at 31000. Shanghai may see a short corrective rise before resuming the fall again.

Crude prices have bounced back sharply in line with our expectations and can potentially target $78-80 (WTI) and $80-82 (Brent). Gold, Silver and Copper have dipped further and can extend the fall further towards 2400-2350, 26 and 3.85-3.80 respectively before a bounce back takes place. Natural Gas has risen well and can potentially rise further towards 2.2-2.5 in the near term.

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