Morning briefing: EUR/USD can test 1.1575

Vikram Murarka Kshitij Consultancy Services

Most currencies are stable. Dollar index is holding below 99.50 just now but a decisive break on the upside can take it towards 100-100.50. Euro can test 1.1575 but a break below that will drag it lower towards 1.15/14. EURINR could rise to 111.85-112 soon before facing rejection from there. EURJPY and USDJPY could trade within 185-186 and 159.00-160.50 respectively while USDCNY may rise to test 6.7850 before facing rejection from there. Aussie and Pound can trade within 0.72-0.71 and 1.34-1.3550 while USDINR can face rejection near 96 from where a fall back towards 95.75-95.50 can be possible.

The US Treasury Yields seem to be struggling to get a strong follow-through rise. That keeps alive the danger of seeing an extended fall breaking below their support. We will have to wait and see. The unemployment numbers today will need a close watch, and it may give some cue for the yields to move either way. The German Yields are managing to sustain higher after the recent bounce. But they have to rise further from here to go higher and avoid falling back again. The 10Yr GoI has dipped below 7%. That keeps the door open to see one more leg of fall before reversing higher. The RBI monetary policy meeting outcome is due today.

Global equities remain mixed, with Dow rebounding sharply on ceasefire-related optimism and likely to test 52000 in the near term. DAX remains weak below 25000 and can decline further towards 24500-24000. Nifty continues to hold above 23,300 and can extend gains towards 23,600. Nikkei has slipped below 67000 and risks a further decline towards 66000-65000 if the weakness persists. Shanghai is holding above key support near 4050 and can bounce towards 4100-4125 while this support remains intact.

Crude prices have fallen sharply on hopes of easing geopolitical tensions, but with uncertainty over the ceasefire's durability, the broader outlook remains positive for a rise towards $100 in the coming weeks. Gold and Silver continue to weaken towards the lower end of their respective $4400-$4600 and $70-$80 ranges. Copper is holding above key support near $6.40, and a rebound towards $6.70 or higher remains possible if this level holds. Natural Gas has strengthened in line with expectations and can rise further towards $3.50 in the coming sessions.

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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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