Sharp fall in the Dollar seen after the lower US CPI release where the headline inflation came out at 3.09% (Y/Y%) compared to previous 4.13% and our expectation of 3.45%. This has led to strength in most currencies against the Dollar. The Pound, Aussie and Euro has surged well and can target 1.32/34, 0.6850 and 1.12 on the upside in the coming sessions while the EURJPY and USDJPY show slight pause and a possible bounce from 153.40 and 138 respectively with a near term target of 155/156 and 140. USDCNY can rise to 7.20/2150 while above 7.16. USDRUB remains ranged within the broad 89.25-94.50 region. EURINR is headed towards 92 while USDINR can open with a gap down today to test 82.00-81.90.

Dollar Index (100.47) has fallen sharply breaking below 101. It could be headed lower towards 100 which if breaks further will open up our long awaited targets of 99/98 on the downside. Watch for any corrective rise from 100.

EURUSD (1.1146) is headed towards resistance at 1.12 which if holds can take the Euro back towards 1.11/10 in a corrective fall. A break above 1.12 is needed for Euro to continue bullishness towards 1.14/16. The rise to 1.12 has happened in line with our longer term projections but much faster than our expected time frame of next 1-2 months.

EURJPY (154.39) tested 153.455 yesterday before bouncing back to current levels exactly as expected. While above 153.40, view is bullish for the pair in the near term towards 155-156.

Dollar-Yen (138.50) has managed to pause above 138. It has to sustain and rise from here towards 140 to prevent any further decline below 138 else can be vulnerable to see a sharp fall to 136.

USDCNY (7.1727) has paused its plunge above 7.16 and a possible corrective rise is possible towards 7.20/2150. On the downside there is still scope for a test of 7.10 which will come into focus on a break below 7.15.

Pound (1.3014) has broken above crucial resistance at 1.30. If the rise sustains, Pound may show some fresh rally towards 1.32/34 on the upside. Wait and watch to see if there is any immediate fall from current levels before confirming on further bullishness.

Aussie (0.6804) is rallying towards 0.6850 as expected. Immediate view is bullish.

USDRUB (90.4923) is holding within 89.25-94.50 region. We may expect some sideways movement within this range for some more sessions.

USDINR (82.2525) closed at 82.2525 yesterday on the OTC but fell sharply on the NDF to test 81.9520, the lower trend support. While above 81.90/95, there can be a bounce back to levels above 82. It is to be seen if we get a gap down opening today on the OTC markets to test 81.90-82.00 levels for any buy opportunity. While within the broad 82.60/80-81.90 region, we expect the range to continue unless there is any confirmation of a breakout on either side of the range.

EURINR (91.4184) is in a sharp rally and could target 92.0-92.50 on the upside soon.

The US Treasury yields have declined sharply and can fall more. Softer US CPI data released yesterday has dragged the yields lower. The US Headline CPI came in at 3.09% (YoY) and the Core CPI at 4.86% (YoY). The German yields have also come down sharply. Failure to rise back from here can take them further lower. The 10Yr and 5Yr GoI have risen back very well. A strong follow-through rise from here will avoid the danger of the fall mentioned yesterday and take them higher.

The US 10Yr (3.85%) and (3.95%) have come down sharply. The 10Yr has come closer to 3.8% – the lower end of its 3.8%-4% range. The 30Yr has more room to fall from here up to 3.85%-3.8% while below 4%.

The German 10Yr (2.55%) and the 30Yr (2.58%) yield have come down sharply. The 10Yr has to sustain above 2.5% to keep the bullish view intact. The 30Yr on the other hand is still retaining its 2.1%-2.65% range.

The 10Yr GoI (7.1160%) has risen back above 7.1% again. Need to see if it gets a strong follow-through rise from here to move up to 7.2% and avoid the fall to 7.05% mentioned yesterday.

The support at 7.07% has held well. The 5Yr GOI (7.1088%) has risen back well. A further rise from here will avoid the danger of seeing 7% and take the yield up to 7.2%.

Dow and Nifty has scope to break above 34500 and 19500 and move up further on the upside. DAX needs a follow through rise from here to negate the danger of falling towards 15500-15000. Shanghai needs to break above 3225 to avoid a fall back towards 3150 or lower. Nikkei have bounced back but has to surpass its immediate resistance to negate our bearish view.

Dow (34347.43, +0.25%) is moving to the upper end of its 33500-34500 range in line with our expectation. We expect the Dow to break 34500 and rise to 34800-35000 first and then 35500 eventually.

DAX (16023, +1.47%) has risen above 16000. A further rise from here will negate the view of seeing 15500-15000. In turn that will take the DAX up to 16200-16400 in the near-term.

Nifty (19384.30, -0.28%) continues to oscillate between 19300-19525. We retain our bullish bias on the Nifty to breach 19500 decisively and rise to 19800-20000.

Nikkei (32332.21, +1.22%) has bounced back from a low of 31791.71. A strong break above 32500-33000 is needed to negate our bearish view of seeing a fall towards 31500 or 31000.

Shanghai (3223.81, +0.87%) is hovering below 3225. A sustained break above it can see a test of 3250. Else a fall towards 3150 or lower cannot be negated.

Commodity prices have risen on the release of softer US CPI data yesterday. Brent, WTI and Silver have to surpass their resistances ahead to strengthen the bullish momentum. Gold and Copper looks bullish to rise further in the near term.

Brent ($ 80.41) has risen above 80 and is now heading up towards 81. A rise past 81 is needed to see a rally towards 85. Else we can expect a fall back towards 76-75.

WTI ($ 76) has risen sharply above 75 and has scope to test $ 77-78 on the upside. A break above these levels is needed to move up higher towards 80. Else it can fall back to 73-72.

Gold (1964.30) has risen sharply above 1950. While above 1950, view is bullish to see a rise towards 1975-1980 or even higher to 2000.

Silver (24.44) has risen sharply, breaking above 23.50 as expected. Immediate resistance is at 24.50. A break above it is needed to open doors toward 25-26.

Copper (3.8515) has risen sharply above 3.8. Bias is bullish to see a test of 3.90. A further break above it is needed to move up towards 4.0.

6:00 11:30 UK Trade Bal
Expn -14.6 …Expected -14.6 …Previous -15.0

9:00 14:30 EU Ind Prodn (MoM)
Expn 1.3% …Expected 0.3% …Previous 1.0%

12:30 18:00 US PPI
Expn 0.3% …Expected 0.2% …Previous -0.3%

12:30 18:00 US PPI ex Food & Energy (MoM)
Expn 0.3% …Expected 0.2% …Previous 0.2%

DATA YESTERDAY:
—————–
12:00 17:30 IN IIP
Expn 4.2% …Expected 4.8% …Previous 4.2% …Actual 5.2%

12:00 17:30 IN CPI
Expn 4.30 …Expected 4.58 …Previous 4.31 …Actual 4.81

12:30 18:00 US CPI (MoM)
Expn 0.5% …Expected 0.3% …Previous 0.1% …Actual 0.2%

12:30 18:00 US Core CPI (MoM)
Expn 0.4% …Expected 0.3% …Previous 0.4% …Actual 0.2%

14:00 19:30 BOC Meeting
Expn – …Expected 5.00% …Previous 4.75%