Morning briefing: The US treasury yields continue to fall

Vikram Murarka Kshitij Consultancy Services

Fed Chair Powell on Friday said the economic impact of new tariffs is likely to be significantly larger than expected but they are well-positioned to wait to consider adjustments to monetary policy. The Dollar Index while above 102, can head towards 104 in the near term. The Euro on the other hand is coming off as anticipated and can test 1.085 soon. EURINR is headed to the support near 93 from where a bounce back is expected. USDJPY above 144 can attempt to rise back towards 146-148. EURJPY had slipped below 160 and failure to sustain above it can drag it to 155 on the downside. AUDUSD on the fears of potential recession and larger cuts by RBA slipped below 0.62. The USDCNY has risen past 7.30 and can rise further to 7.33/35 in the coming sessions. Pound slipped below the support at 1.29 and is now headed to the deeper support at 1.275. USDINR tested 84.9475 on Friday before rising higher. A further rise to 86.40 is anticipated in the coming weeks.

The US Treasury yields continue to fall. The bearish view is intact. There is room to fall more. The German yields have declined sharply contrary to our expectation. A break below the upcoming support will negate our earlier bullish view and drag them down. The 10Yr GoI is coming down as expected. It can test its support and then rise back again.

The sell-off in the global equity market persists. The Dow Jones plunged below 39000. A support near 37900 can be seen; if that holds, then the index can bounce to 40000. DAX looks bearish towards 19500-19000. Nifty can face the heat from the sell-off in the market, and it can come down to 23700-23400. Gift Nifty futures are already trading near 22000. Nikkei and Shanghai dropped more than 6%. Nikkei with some support near 30000 needs to hold this support to produce a bounce to 33000 and higher. Shanghai has recovered to the support of 3150. While it stays above 2150-2100, the index can move higher to 3200-3250.

Amid escalating concerns over renewed U.S. tariff pressures under Trump's trade stance, most commodities have taken a sharp hit. Brent and WTI have broken key support levels and look bearish towards $60–$55 and $55–$50 respectively. Gold and Silver saw sharp pullbacks after testing lows, but further upside in Gold depends on holding above $3,000, while Silver remains vulnerable below $31–$32. Copper has rebounded from $4.03, with potential to rise towards $4.40–$4.60 if $4.00 support holds. Natural Gas fell to $3.70 and may test $3.60 before any recovery towards $4.00–$4.20.

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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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