Lower US CPI continues to show impact on currency markets taking the Dollar sharply down. Dollar Index has broken below 100 and could soon be headed towards 99-98 while Euro has surged above 1.12 which if sustains can set to target 1.14. Pound and Aussie are also rising towards 1.34 and 0.69-0.6980 respectively. EURJPY is holding above support at 153.40 and could head towards 155-156 while USDJPY is falling with the Dollar Index and can soon test 136-134 on the downside. USDCNY has fallen sharply and could test 7.10. A further break below 7.10 will take it lower to 7.05-7.00. USDRUB can attempt to fall to 90-88 while EURINR can target 92.25/30 before a reversal is seen. USDINR ought to fall in line with the movement seen in other currency pairs but the RBI intervention could keep it above 81.90.

Dollar Index (99.638) has broken below 100, in line with our long-term expectations. This looks like a fresh fall with enough room on the downside towards 98-96 initially. Watch price action near 98 for now.

EURUSD (1.1236) has managed to break above the resistance at 1.12 contrary to our expectation of seeing a dip. While above 1.12, there is scope to rise further towards 1.14 soon.

EURJPY (154.65) is holding above immediate support at 153.45 and looks bullish for a near term rise towards 155-156.

Dollar-Yen (137.65) is falling in line with the fall in the Dollar Index. Sustained trade below 138 will bring in fresh downside targets of 136-134 for the pair in the medium term.

USDCNY (7.1396) has come down sharply targeting 7.10 mentioned over the last two editions. Break below 7.10, if seen can take it further down towards 7.05-7.00. Immediate view is bearish within a possible corrective fall.

Pound (1.3132) is headed towards 1.32/34. Wait and watch to see if there is any immediate corrective fall from 1.32 before confirming on further bullishness towards 1.34.

Aussie (0.6889) has broken above 0.6850 contrary to our expectations and can now attempt to test 0.69-0.6980 soon before a reversal is seen.

USDRUB (90.1253) could come down slowly while below 92 and test 88 in the next few sessions.

USDINR (82.0775) closed slightly higher above 82 while support near 81.94 held well. But with a strong rise in the Euro and plunge in the Dollar Index, the USDINR ought to have been at much lower levels than seen now. It should ideally see a sharp fall towards 81.80/60 but whether the RBI would allow such a fall is to be seen. Intervention from the central bank if seen can keep the pair within 81.90-82.60 region broadly for the rest of the month irrespective of global currency movements.

EURINR (92.1104) has surged well and could face resistance near 92.25/30 from where a rejection is possible back towards 91.50.

The US Treasury yields have declined further sharply as the US inflation data continues to weigh on the yields. More fall is on the cards. The German yields are back into their sideways range thereby negating our bullish view of seeing a rise. They can fall within their range now. The 10Yr and 5Yr have declined sharply below their supports and have room to fall more.

The US 10Yr (3.78%) and 30Yr (3.91%) have declined further. The 10Yr is below 3.8% and while this sustains, a fall to 3.6% cannot be ruled out. The 30Yr can come down to 3.8%-3.75%.

The German 10Yr (2.47%) and the 30Yr (2.52%) yield have come down sharply. Failure to rise back above 2.5% can put the 10Yr back into its 2.1%-2.5% range and drag it lower. The 30Yr retains its 2.1%-2.65% range and is coming down within it.

The 10Yr GoI (7.0729%) has come down sharply below 7.1%. It can test 7.05% and need to see if the yield is reversing higher thereafter or extending the fall up to 7%.

The 5Yr GOI (7.0586%) declined below 7.07%. It can now test 7% while this break sustains.

Dow is hovering near the upper end of its sideways range but bias is positive to see a break on the upside. DAX continues to move up and looks bullish for the near term. Nifty has come down sharply yesterday but the downside could be limited to 19300. Shanghai has scope to test 3250 on the upside. Nikkei lacks follow-through rise and failure to rise past its resistance could lead to a fall to our expected level.

Dow (34395.14, +0.14%) is hovering near the upper end of its 33500-34500 range. We expect a break above 34500 and a rise to 34800-35000 and 35500 eventually.

DAX (16141.03, +0.74%) continues to move up and can rise to 16400-16500 on a break above 16200.

Nifty (19413.75, +0.15%) has come down sharply, failing to sustain the breakout above 19525. The index is back into its 19300-19525 range and we expect it to retain it. Bias is still bullish to see 19800-20000.

Nikkei (32329.14, -0.28%) lacks follow through rise. As mentioned, a strong break above 32500-33000 is needed to negate our bearish view for a fall towards 31500 or 31000.

Shanghai (3242.41, +0.18%) has risen above 3225. A test of 3250 is possible now. A further break above it will lead to a rise towards 3275-3300.

Commodity prices continue to rally. Brent, Gold, Silver, and Copper look bullish in the near term. WTI has entered into the immediate resistance zone of 78. Need to see if it breaks above it or not.

Brent ($ 81.36) has risen well above the resistance at 81. While this break sustains, a further rise toward $ 85 looks possible.

WTI ($ 76.94) has entered into the immediate resistance zone of 78 as expected. A break above it is needed to rally towards 80 or higher. Support is at 75.

Gold (1966.80) continues to rise. Bias remains bullish to see a rise towards 1975-1980 or even higher to 2000.

Silver (25.07) has risen above the resistance at 24.50. The view is bullish for a further rise towards 26.

Copper (3.9435) has risen sharply above 3.9. While above 3.9, a test of 4.0 looks likely. Thereafter we have to see if it breaks further above 4 or not. A break above 4, if seen, will open doors toward 4.2.

6:30 12:00 IN WPI
Expn -2.59% …Expected – …Previous -3.48%

9:00 14:30 EU Trade Bal
Expn – …Expected – …Previous -7.1EUR Bln

10:00 15:30 IN Trade bal
Expn – …Expected -21.22$ Bln …Previous -22.12$ Bln

DATA YESTERDAY:
—————–
6:00 11:30 UK Trade Bal
Expn -14.6 …Expected -14.6 …Previous -14.6 …Actual -18.7

9:00 14:30 EU Ind Prodn (MoM)
Expn 1.3% …Expected 0.3% …Previous 1.0% …Actual 0.2%

12:30 18:00 US PPI
Expn 0.3% …Expected 0.2% …Previous -0.4% …Actual 0.1%

12:30 18:00 US PPI ex Food & Energy (MoM)
Expn 0.3% …Expected 0.2% …Previous 0.1% …Actual 0.1%