Morning briefing: ECB rate cut could send EUR/USD plunging lower

Vikram Murarka Kshitij Consultancy Services

The Dollar Index can head towards 107-108 in the near term if sustained above 106.75. Euro had slipped below 1.05 yesterday. If the ECB goes ahead with rate cuts today, it can extend the fall towards 1.0450 or even lower. The upside seems to be capped at 1.0550-1.0600. EURINR is coming off within its range of 90-88 which can hold for now. Aussie tested 0.6336 before rising back from there. Still, a rise past 0.6450 will be needed to head towards 0.65-0.66 in the near term. The Pound on the other hand looks ranged within a narrow region of 1.7-1.28. A break on either side will be needed for further directional clarity. USDCNY has again risen past 7.25 on the news that China will allow Yuan to weaken to prepare for Trump tariffs. While above 7.25, the previous targets of 7.30-735 seem to be back in the picture. USDJPY can rise higher towards 154-155 in the coming sessions while above 150. EURJPY remains bullish towards 162-163, while above 156. USDINR seems to hold the resistance of 84.85/87 quite well and can dip towards 84.75-84.70 in the coming sessions. Watch out for the IN-CPI data release and the ECB & SNB meetings scheduled today.

The US Treasury yields have risen above their immediate resistance after the inflation data release. A strong follow-through rise from here can take the yields higher and will negate the further fall. The US Headline CPI rose by 2.73% in November, up from 2.58% in October. The German yields continue to remain stable. Support is there to limit the downside from here. Bias is positive to see a rise in the yields going forward. The 10Yr GoI is moving up. There is room to rise more from here before falling back again.

Dow Jones remains bearish towards 43000 initially. DAX is holding well above support at 20200 as expected and can rise towards 20500/700 or even to 21000. Nifty has risen a bit but remains stable around 24600. An immediate range of 24550-24750 can hold for some time within an overall broader bullish picture. Nikkei rose to 40091.55 before easing off. While it sustains above 39500, bias remains bullish towards 41000-42000. Shanghai has risen a bit. Above 3400 view is bullish towards 3500.

Crude prices have risen sharply after OPEC cut demand growth forecasts for 2024 and 2025. The prices can rise further towards 74-75 (Brent) and 71-72 (WTI) in the near term. Gold and Natural Gas can rally higher towards 2770-2800 and 3.5-3.6 respectively while Silver and Copper have immediate resistance levels which if hold can lead to a fall to 32.5-32.0 and 4.2 respectively 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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