Morning briefing: Euro is vulnerable to test 1.0100

U.S. President Donald Trump imposed new tariffs on Canada, Mexico, and China effective from Tuesday, levy 25% on Canadian and Mexican imports, with a 10% rate on Canadian energy products and Chinese goods. This led to Dollar Index strengthening past 109 and Euro to break below 1.03. Now, if the index rises further, can test 110-111 on the upside before getting peaked out and if so, Euro would be vulnerable to test 1.01 or even 1.00 on the downside. EURINR can trade within broad range of 91-89 region, until a decisive break is seen. USDJPY needs to rise past 156 to turn bullish again. EURJPY, AUDUSD and Pound have broken below the lower ends of their ranges of 164-160, 0.63-0.62 and 1.26-1.24 and can soon test our targets of 157-156, 0.60 and 1.22 respectively. USDCNY is closed today. USDINR on the NDF is currently trading higher and if the spot opens higher in the onshore markets, a test to 87 can happen much sooner than expected.

The US 10Yr and 30Yr yields have declined slightly. Key support levels are at 4.5%–4.4% for the 10Yr and 4.37%–4.6% for the 30Yr. As long as these supports hold, the 10Yr yield could rise toward 5.0%, while the 30Yr yield may target 5.2% in the medium term.The German yields have fallen as expected and remains bearish for the near term. The 10Yr GoI looks ranged for some time before a rise takes place.

The Dow Jones has turned lower, holding the range of 41850-45100. Further, while above 44500, it could rise to 45250. DAX reached a high of 21800.52 and above 21700 and could extend the rise towards 21900 before seeing a turnaround. Nifty attempted a rise to 23700 but failed to sustain it and closed above 23400. If it stays above 23400, a rise towards 23700-23800 looks possible. Nikkei has plummeted by 2.5%, falling to 38600. Further, it could come down to test the support of 38000-37800.

Crude prices are holding above key support levels, with potential for a rise towards $78-79 (Brent) and $75-76 (WTI). However, a break below support could lead to further declines. Gold has faced resistance near $2850, with a possible short-term drop to $2800-2750 before a rebound towards $2900 takes place. Silver has dropped slightly, with support around $31.5, the bullish outlook towards $33.0-33.5 looks likely for the near term. Copper and Natural Gas remains bearish towards $4.1 and $3.0-2.8 respectively for the coming weeks.

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