Morning briefing: Pound is trading higher within its range of 1.2500-1.2800

Vikram Murarka Kshitij Consultancy Services

The Dollar Index looks stable above the support of 106.75 for now but the upside is likely to be capped at 108. A break below 106.75 can strike in further bearishness. Euro needs to see a break past 1.0530/50 to head towards 1.0600 in the coming sessions. EURINR needs to see a decisive break on either side of the range of 88-90 for further directional clarity. Aussie is coming off as expected and can soon test 0.63 before bottoming out. The Pound is trading higher within its range of 1.25-1.28. USDCNY continues to rise further and remains bullish towards 7.30-7.35 while above 7.28/25. USDJPY and EURJPY seem to be holding well below 155 and 163 and the view remains bearish towards 152 and 160 or lower respectively in the near term. USDINR tested 84.90 yesterday. If it fails to see an immediate dip in the onshore markets below 84.90, then it could be vulnerable to head towards 84.95-85.00 soon. Watch out for US Housing starts, US Current Account balance and the FOMC meeting scheduled today.

The German and the US Treasury yields continue to remain stable. Market is waiting for the US Federal Reserve meeting outcome tonight. A 25-bps rate cut is already factored in the market. Important to watch tonight will be the economic forecast that will have the future rate cut path. On the charts, both the US Treasury and the German yields have room to rise more from current levels. The 10Yr GoI is moving up in line with our expectation. A reversal is still possible after some more rise from here.

The Dow Jones continues its downward trend without our expected corrective rise to 40700 thus, reinforcing our bearish outlook for a move toward 43,000. DAX declined intraday but managed to close above 20,200, maintaining a bullish bias as long as it holds above this level. Dax can now target 20,700–21,000 while 20200 holds well. Nifty tested support near 24,300 and rebounded slightly. With additional moving average support also near this level, a sustained hold above 24,300 would keep the bullish view intact, targeting higher levels. Nikkei dropped to an intraday low of 39,123.32 before recovering. However, while trading below 39,500, the index remains vulnerable to further declines toward 39,000–38,000. Shanghai fell to 3,357 intraday before recovering to the current level. The index could retest resistance near 3,400, but a sustained break above this level is required to negate a bearish outlook targeting 3,350–3,300.

Concerns about weak Chinese energy demand are weighing on crude prices. A broad range of $76-71 (Brent) and $72-67 (WTI) can hold for some time. Gold and Copper remain bearish towards 2600 and 4.05 respectively for the near term. Silver is holding above its immediate support and can bounce back towards 31.5-32.0. Natural Gas can extend its bullishness further towards 3.6.

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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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