Morning briefing: Euro has immediate support around 1.0330-1.0300 region

FED cut a 25 bps rate cut which was widely expected but the comment that they would go slowly on future rate cuts next year given a stable labor market and inflation led to Dollar strength contrary to our expectations. The Dollar Index tested 108.26 before declining a bit from there while Euro came down significantly but has immediate support around 1.0330-1.0300 region above which a rise can be expected soon. EURINR had slipped below 88 but is back within its range of 90-88. Aussie has slipped below 0.63 but while it sustains above 0.62 it has a scope to rise back towards previous levels. The Pound is trading lower within its range of 1.28-1.25. USDCNY continues to rise further and remains bullish towards 7.30-7.35 while above 7.28/25. USDJPY has risen past 155, while EURJPY seems to be holding well below 163. USDJPY if sustained above 155, can head towards 157. On the other hand, the outlook appears bearish on EURJPY while below 163. USDINR, yesterday tested 84.9575 in the onshore markets. It might open around 85 today as the Spot on NDF is also trading higher. Thereafter whether the level of 85 holds or not will have to be seen. Watch out for US Philifed Index, US Existing Home Sales and US GDP data release scheduled today.

The US Treasury yields have surged after the Fed meeting outcome last night. The yields are now hovering around a key resistance. A strong follow-through rise above it can take them further higher. Else they can fall back. We will have to wait and watch. There was a 25-bps rate cut from the Fed as expected. However, the trigger for the rise for the yields came from the economic projections. The Fed has kept the doors open for a 50-bps rate cut in 2025. This is down from its earlier projection for a 100-bps rate cut. Also, the US PCE, Fed’s inflation gauge has been revised higher to be at 2.5% in 2025, up from 2.1% projected earlier. The German yields sustain higher. Outlook is bullish and more rise is on the cards. The 10Yr GoI can rise in the near-term and then reverse lower after testing their resistance.

The Dow Jones plunged below 42,500 following the Fed’s rate cut announcement, with signals that future reductions in the federal funds rate will likely be limited. Watch price action near 42100, a break below which can be further bearish for the Dow. DAX closed flat, holding above 20,200. A decline toward 20,000-19900 is expected before resuming its upward trajectory toward 20,700-21,000 eventually. Nifty slipped below 24,300, but the critical support at 24,150 remains intact for now. However, bearish cues from global markets may weigh on Nifty. A breach of 24,150 could extend the decline to 24,000-23,800. Nikkei dropped below 39,000, reaching a low of 38,355.52 before a recovery. Below 39,000, a further fall to 38,000 remains likely. Shanghai fell to 3,346 before rebounding slightly, but the overall outlook remains bearish below 3,400, targeting 3,300.

Crude prices may remain ranged between 76-71 (Brent) and 72-67 (WTI) for some more time. Gold, Silver and Copper have plunged sharply after the FED rate cut of 25bp. While the immediate support levels hold, a bounce back towards 2650-2700, 30.5-31.0 and 4.15-4.20 respectively can take place in the near term. Natural Gas can test 3.6 in the upcoming sessions.

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