Morning briefing: Euro downside is expected to be limited to 1.0450-1.0400

Vikram Murarka Kshitij Consultancy Services

ECB went ahead with the 25 bps rate cuts, thereby bringing the refinancing rate to 3.15%. As a result, Dollar Index rose past 107 which if sustained can test 108 as well before getting topped out. Euro continues to trade below 1.05 but the downside is expected to be limited to 1.0450-1.0400. EURINR is coming off within its range of 90-88 which can hold for now. Aussie has again slipped below 0.64 but a fall below 0.6350-0.63 is not anticipated. It can bounce back higher upon testing 0.6350-0.6300 on the downside. The Pound can also fall within its earlier range of 1.2750-1.2450. USDCNY continues to rise further and while above 7.25, the view remains bullish towards 7.30-735. USDJPY can rise higher towards 154-155 in the coming sessions while above 150. EURJPY remains bullish towards 162-163, while above 156. USDINR needs to see a break below 84.80 to test 84.75/70 on the downside. Else, it can be vulnerable to see a break above 84.88 and become bullish towards 84.95-85.00.

The US Treasury yields are getting a good follow-through rise following the rise seen after the inflation data release on Wednesday. That leaves the short-term outlook bullish, and the yields can rise more in the coming days. The German yields have risen sharply. That keeps intact our bullish view. The ECB made another 25-bps rate cut in its meeting yesterday, in line with market expectation. More rise can be seen going forward. The 10Yr GoI is moving up as expected. Some more rise is possible before it turns down again.

The Dow Jones has declined below 44000, keeping our bearish view towards 43000 and then to 42000/41000 intact. DAX remained stable below 20500. A break past 20500 is required to pave the way towards 20500-20700 which can be followed by a corrective fall to 20000 later. Nifty has declined below 24600. While it holds above 24500-24400, and upon breaking past 24700, a rise towards 25000 looks possible. Nikkei faced a rejection from 40000 and has come down below 39500. A break below 39000 would take the index down to 38000. Watch price action near 3400 on Shanghai as a bounce or break of this level would decide the next course of movement.

Curde prices have dipped slightly but the outlook remains bullish for the prices towards 75-76 (Brent) and 72-73 (WTI). Gold and Silver have fallen but they can bounce back towards 2770-2800 and 32.5-33.0 respectively while above 2700 and 31. Copper remains mixed for the upcoming sessions. Natural Gas can test 3.6 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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