Morning briefing: Euro can fall towards 1.0900 – 1.0850 in the near term

RBA kept rates unchanged and hinted that a rate cut is far away while the BoJ Deputy Governor Shinichi Uchida indicated that they would not raise rates in an unstable market which led the USDJPY to rise further. Dollar Index, USDJPY, EURJPY and USDCNY saw some recovery yesterday and if sustained above current levels, can rise in the near term. Euro has been coming off as expected and while below 1.10, it can fall towards 1.09-1.0850 in the near term. Aussie is rising higher within 0.64-0.66 range while Pound has slipped slightly below 1.27 contrary to our expectation of rising to 1.29/30. Any further break below current levels can drag the pair further towards 1.26. USDINR tested 83.9575 yesterday but while below resistance at 84, it is likely to fall back towards 83.75/70 in the near term. EURINR above 91 can attempt to rise back towards 92-93 in the near term. Only a decisive break below it can drag the pair towards 90.

The US Treasury yields have risen further. The expected corrective rise is happening. There is room to rise further before the yields fall back again and resume the downtrend. The German yields continue to remain lower and stable. The view remains bearish and there is room to fall more from here. The 10Yr and 5Yr GoI can see a near-term corrective rise before resuming their broader downtrend. The outcome of the RBI meeting outcome tomorrow will be important to watch.

Dow Jones attempted to bounce back but the broader view will remain bearish while below 39300. Nikkei extended the recovery further as expected and looks bullish while above 31000. Nifty has fallen back after failing to sustain the bounce, which makes it vulnerable to a fall towards 23500-23300 now. DAX and Shanghai may see a short term rise before resuming the fall again.

Crude prices have fallen back but while above their key immediate support levels, they can potentially bounce back towards $75-76 (WTI) and $80 (Brent). Gold continues to fall and can dip towards 2400-2375-2350. Silver and Copper can test their key support at 26 and 3.85-3.80 before a bounce back can take place. Natural Gas can potentially rise 2.2-2.5 while above 1.9.

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