Morning briefing: Euro has surged past 1.0900

Vikram Murarka Kshitij Consultancy Services

Major currency pairs witnessed volatile movements yesterday. The news came in that President Donald Trump has announced 10% tariffs across all imports and higher duties on some of the U.S.’s biggest trading partners. The Dollar Index slipped below 103.75 and now looks bearish to 102-101. On the other hand, Euro has surged past 1.09 and can head towards 1.10/11. EURINR has risen past 93 and is nearing the interim resistance near 94. USDJPY has broken below 149 and can now test either 146 or 144 before attempting to rise back higher. EURJPY continues to remain volatile within its broad range of 164-160. The USDCNY tested our target of 7.30. Now, a confirmed break past it can bring 7.33/35 into the picture. AUDUSD is holding the range of 0.62-0.64 for now. Pound has risen past 1.30 and if sustained, can extend the rally towards 1.35 in the near term. USDINR is trading higher on the NDF despite Dollar weakness. Still, while below 85.75.80, outlook appears a bit bearish to 85.25-85.00. US Trade Balance data release is scheduled today.

The US Treasury yields have declined sharply. The fall is happening in line with our expectations. The bearish view is intact. There are good chances to see an extended fall over the medium term. The German yields have bounced. There is limited room on the downside. The broader trend is up, and we can expect the yields to rise back eventually going forward. The 10Yr GoI has declined sharply, breaking below a key support. This is contrary to our expectation to see a bounce back from the support. The trend remains down and the yield can fall further in the coming days.

The Dow Jones closes above 42200. Needs to see whether it sustains or not, especially after Trump's decision to raise import duties has led to a sell-off in the Asian market, with US futures also in deep red. If it sustains, then it would negate the fall to 40000-39000. DAX declined to a lower or sideways range of 22200-23500 and looks vulnerable to witnessing a fall to 21500-21300. Nifty has risen, but the bias remains towards seeing a fall to 23000-22800 before seeing an upmove. Nikkei plunged to 34000 with a slight recovery; a break below 34000 would lead to a further fall to 33000. Shanghai opened lower near 3020 but has recovered and is heading towards testing 3380.

Brent and WTI closed higher yesterday but opened lower today, testing support levels, with a potential rebound expected. Gold hit $3,200 before retreating; a breakout could push it to $3,250-$3,300, while failure may lead to a fall towards $3,100-$3,000. Silver briefly broke support but recovered; sustained weakness could drag it to $33.50-$33.00. Copper looks vulnerable for a fall towards $4.80-$4.70 in the near term . Natural Gas needs to break above $4.00 to trigger a rally towards $4.20-$4.40.

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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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