The lower US CPI release led to Dollar weakness while most currencies have strengthened against the Dollar overnight but have managed to recover slightly. Now it must be seen if the impact of lower CPI will continue to keep the Dollar lower over the coming days and continue strength in currencies or if they will recover to previous levels seen earlier this week. Euro tested 1.09 before coming off while USDCNY recovered within the 7.26-7.28 range after a decline to 7.2496. The possible intervention from BOJ led USDJPY and EURJPY to fall significantly. If USDJPY and EURJPY face downside pressure, it will be difficult for the Dollar Index to strengthen considerably from current levels. Aussie & Pound on the other hand tested 0.6798 and 1.2949 before cooling down. EURINR observed a high of 91 but could not sustain it and has declined a bit. The rupee has scope to open stronger today but can eventually recover by the end of the session.

The Dollar Index (104.519) slipped sharply below the support around 104.75 to test 104.077. This was led by the softer-than-expected US CPI (Y/Y%, 3%) which has ramped up market expectations for a September interest rate cut by the Federal Reserve. Currently the index has recovered a bit from yesterday’s low and is holding well above 104, above which a range of 104-106 is likely to hold for the near term.

EURUSD (1.0865) rose sharply to test 1.09 on Dollar weakness after the lower-than-expected US CPI release but has dipped back from there now. Overall a broad range of 1.09-1.07 can continue to hold in the near term.

Weaker US CPI release and possible speculation of intervention by BOJ has led Dollar-Yen (159.35) and EURJPY (173.17) to fall significantly. Immediate support can be spotted around 157 and 171/170.50 respectively above which the pairs can attempt to rise back towards earlier levels of 161/162 and 175/176 respectively. Only a decisive break below the mentioned supports would indicate further bearishness in the near term.

USDCNY (7.2635) has declined below our narrow range of 7.26-7.28 and tested a low of 7.2496 before recovering from there. While above 7.26, we are retaining our view of seeing a rise towards 7.28 in the near term.

Aussie (0.6762) and Pound (1.2904) tested 0.6798 and 1.2949 on the upside before cooling down. There is still some room on the charts to further test 0.6850 and 1.30 respectively but whether it will happen or not will have to be seen. Overall, a range of 0.67-0.6850 and 1.28-1.30 can persist for a while.

USDINR (83.5650) had surged significantly to the level of 83.59 before coming down. The pair can open lower on the OTC market today before moving higher by the end of the session. We continue to look at 83.60-83.40/30 to hold for the day.

EURINR (90.7595) indeed rose to the level of 91 before declining a bit. It is to be seen if the pair rises back to 91 or remains within 91-89 range in the coming days.

The US Treasury yields have come down after the inflation data release yesterday. The US Headline CPI came in at 2.98% (YoY) for June, down from 3.25% seen in May. The Core CPI was at 3.28% (June), down from 3.41% (May). The Treasury yields are coming closer to their support. Failure to bounce thereafter can trigger an extended fall. The German yields have declined sharply. But supports are there to limit the downside and keep the broader uptrend intact. The 10Yr and 5Yr GoI have bounced slightly. But the upside is likely to be capped and they can see a fall in the near-term.

The US 10Yr (4.22%) and the 30Yr (4.43%) yields have declined further and are coming closer to 4.2% and 4.4% respectively. Failure to bounce back thereafter can see an extended fall to 4.1% (10Yr) and 4.3% (30Yr). The price action in the next fews days will be important.

The German 10Yr (2.46%) and the 30Yr (2.65%) yields have come down sharply. But the support at 2.4% (10Yr) and 2.6% (30Yr) can limit the downside and keep the overall uptrend intact to see 2.8% (10Yr) and 3% (30Yr) on the upside.

The 10Yr GoI (6.9832%) has bounced back. But we retain our view of seeing a fall to 6.96%-6.95% first and then a rise back towards 7%. Failure to bounce from 6.96%-6.95% can drag it down to 6.9% and lower.

The 5Yr GoI (6.9668%) has bounced but remains below 6.97%. It still looks vulnerable for a fall to 6.95%-6.9%. A strong rise above 7% is needed to negate this fall.

Dow Jones and Shanghai have inched up further and look bullish to target 40000-40200 and 3000 in the near term. DAX has risen towards its upper end of the range whereas Nifty is oscillating within its 24000-24450 range. Bias is positive for both DAX and Nifty to see an eventual break on the upside of the range. Nikkei has fallen further but has near-term support, which if holds, can produce a bounce back toward its crucial resistance.

Dow (39753.75, +0.08%) is holding higher. While above 39600, the bullish view is intact to see 40000-40200 on the upside.

DAX (18534.56, +0.69%) is moving up towards the upper end of the 18000-18600 range. The bias is positive to break the range above 18600 and rise to 19000-19200.

Nifty (24315.95, -0.03%) continues to oscillate in the 24000-24450 range. While above 24000, the bias is positive to break 24450 and rise to 24700 and higher.

Nikkei (41430.50, -2.00%) has fallen further but has support at 41000. While that holds, a rise to 43000-44000 is still possible before a corrective fall can happen towards 41000-40000.

Shanghai (2969.66, +0.02%) is gradually moving up. A rise towards 3000 looks possible. Thereafter, a further break above 3000, if seen, could be bullish towards 3050 or higher.

Crude prices have to rise past their immediate resistance to open doors for a rise toward their next key resistance. Gold and Silver saw a sharp rise yesterday after the release of lower-than-expected US CPI data. Both Gold and Silver look bullish for the near term. Copper, on the other hand, has fallen below 4.50 but the downside could be limited to 4.4. Natural gas continues to drift lower and has scope to target 2.1-2.0 on the downside.

Brent ($ 85.54) continues to inch up. A rise past $ 86.00-86.50, if seen, can lead to a rise towards $ 88-90. Else could fall back to $ 84-83. It is a wait-and-watch now.

WTI ($ 81.53) is hovering below $ 82. A rise past $ 82 is needed to open doors toward $ 84-85. Else could fall back towards $ 80-79. It is a wait-and-watch now.

Gold (2413.20) has risen sharply above 2400. A rise towards the resistance at 2450-2460 looks likely in the near term. While 2450/2460 holds, a fall back towards 2400 could be seen.

Silver (31.47) has risen towards the upper end of the 30.50-32.00 range. It has scope to break above 32.00 and rise towards 33.00 in the near term.

Copper (4.4980) has declined and tested a low of 4.4850. It might come down further to 4.4 before a bounce back happens towards 4.7. As long as it holds above 4.4, the chances of a break above 4.7 and rise towards 4.8-5.0 cannot be ruled out.

Natural Gas (2.2710) continues to fall and can test 2.1-2.0 on the downside before a potential rise towards 2.5 occurs.

12:00 17:30 IN IIP
Expn 3.1% …Expected – …Previous 5.0%

12:00 17:30 IN CPI
Expn 0.7 …Expected – …Previous 0.5

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

12:30 18:00 US PPI ex Food & Energy (MoM)
Expn 0.2 …Expected 0.2 …Previous 0.0

Data Yesterday
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6:00 11:30 UK Trade Bal
Expn -18.5 (bln) …Expected -15.6 (bln) …Previous -19.4 (bln) …Actual -17.9 (bln)

12:30 18:00 US CPI (MoM)
Expn 0.2% …Expected 0.1% …Previous 0.0% …Actual -0.1%

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