Morning briefing: Pound has risen past 1.2800

Vikram Murarka Kshitij Consultancy Services

The Dollar Index has risen well and has the further scope to test 103.50 before topping out. Euro below 1.10 can fall back towards 1.09-1.0850 in the near term. The USDJPY and EURJPY has risen well and can test 150 and 165 on the upside before resuming their downtrend in the medium term. Pound and Aussie have risen past 1.28 and 0.66 respectively but needs to be cautious around current levels. USDCNY looks stable above 7.17 for now and if sustained, can test 7.20 in the near term as well. EURINR below 93 is likely to fall back towards 92-91.50 in the coming sessions. USDINR was closed yesterday but overall the pair is likely to move within 83.80-84.00/84.10 region for sometime.

The US Treasury yields have come down failing to sustain the bounce seen on Wednesday. The broader view remains bearish, and the yields can continue to fall from here. The US Headline CPI data on Wednesday showed that the inflation rose by 2.92% (YoY) in July down from 2.98% in June. Slowing inflation strengthens the case of a rate cut next month and is weighing on the yields. The German yields have risen back but are likely to be short-lived. The broader trend is down, and the yields can resume the fall in the coming days. The 10Yr GoI is at the lower end of its range. The bias is negative to break the range on the downside and fall.

Dow Jones, DAX, Nikkei and Shanghai have risen sharply after strong US economic data release. The lower than expected US Unemployment Claims and Higher US Retail Sales helped in easing the recession fears and boosted stocks. Nifty may bounce back today taking cues from Global equities. Shanghai and Nikkei have risen sharply but they might face rejections at 2900 and 38000.

Brent and WTI might trade within $79-82.50 (Brent) and $75-79/80 (WTI) for a while. Gold, Silver and Copper has scope to rise towards 2550-2600, 29.00-29.50 and 4.20-4.30 in the near term. Natural Gas may fall towards 2.1-2.0 if it fails to break above 2.30.

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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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