Recent fluctuations in the forex market have been majorly dominated by the Japanese Yen which weakened over yesterday and today after Uchida’s comments on holding rates, aiding a recovery in the Dollar Index from 102.15 seen earlier during the week. However, the Dollar Index can face rejection from 103.80-104 which can limit a fall in Euro to 1.0850 and an upside for USDJPY and EURJPY to 148-150 and 161/163 respectively. Pound could test interim support at 1.26 while the Aussie can test 0.6580-0.66 in the near term. USDCNY is headed towards 7.20. EURINR could have supports near 91.50 and 91 which can hold and take the pair back towards 92. Bulls are holding on to USDINR over the last 2-sessions and unless a pullback to 83.80 is seen today, the bulls could take the pair soon towards 84+ levels. Watch for price action in the near term with immediate support at 83.80. All eyes will be on the RBI policy meeting today which can keep the pair volatile.

Dollar Index (103.129) has recovered well from 102.15 seen earlier during the week. The rise can extend to 103.75/80 or even 104 in the next few sessions before pausing. Immediate resistance is seen below 104 which may hold in the near term. On the longer term charts, the rise from 102 has been crucial and the index needs to break above 104 and sustain to extend upmove towards 105/106 in the longer run; else 102-104 range could hold for a couple of weeks at least.

EURUSD (1.0928) is holding well below immediate resistance near 1.0950/60 and has fair chances of falling towards 1.09-1.0850. A break above 1.0960 if seen again can bring in bullishness but looks less likely for now.

Dollar-Yen (146.57) and EURJPY (160.23) seem to be taking a breather after the sharp fall seen in the last few weeks. Both pairs may test 148-150 and 161-163 respectively before returning to 145 and 158/157. The overall trend remains bearish.

USDCNY (7.1753) is headed towards 7.20 but whether it will fall back from there to resume downtrend or break higher to reconquer 7.22/24+ levels needs to be seen in the medium term. Watch price action near 7.20.

Pound (1.2693) has immediate support near 1.26 which if holds can take it back towards 1.2750/28, keeping the 1.26/28 region intact. Only a break below 1.26, if seen can bring in 1.24 into the picture. Watch price action near 1.26 to see if a bounce comes in from there as expected.

Aussie (0.6552) has recovered well but will have to break above the 0.6580-0.66 hurdle to turn bullish towards 0.6750-0.68. Else while below 0.66, Aussie could spend some time trading within 0.66-0.6450/6400.

USDINR (83.96) has shown two consecutive day closes above 83.90 indicating strength in the pair and that it could have some chances of a dip to 83.80 before resuming the upmove towards 84 or higher. The lack of immediate pullback today towards 83.80 could keep the bulls intact for the near term. Some volatility is expected today on RBI policy statement.

EURINR (91.7860) can face interim support near 91.50 and then lower near 91.00 which are likely to hold and push the pair higher towards 92 again in the medium term. A sustained break below 91 would be needed to bring in bearish sentiment which looks less likely while above 91. Watch price action at 91.50/91.00 for confirmation.

The US Treasury yields continue to move up in line with our expectation. Key resistances are ahead. We expect the yields to fall back after testing the resistance. The German yields have bounced well. Though there is room to rise, the broader trend will remain down and the yields are likely to come down again. The 10Yr and 5Yr GoI have fallen back. The expected corrective rise is not happening, and the yields can fall from here. The outcome of the RBI meeting today will be important to watch.

The US 10Yr (3.92%) and the 30Yr (4.24%) yields continue to move up towards 4% (10Yr) and 4.3% (30Yr). We expect the yields to reverse lower after this rise and fall back to 3.5% (10Yr) and 3.8% (30Yr) over the medium-term. A rise above 4% (10Yr) and 4.3% (30Yr) will only negate the fall.

The German 10Yr (2.26%) and the 30Yr (2.49%) yields have risen back sharply. But this could be short-lived and capped at 2.4% (10Yr) and 2.6% (30Yr). The broader view remains bearish to see 2% (10Yr) and 2.2% (30Yr) on the downside.

The 10Yr GoI (6.8632%) and the 5Yr GoI (6.7893%) yields have fallen back. The corrective rise to 6.9% (10Yr) and 6.82%-6.84% (5Yr) looks like not happening. Broadly the downtrend is intact, and the yields can fall to 6.8%-6.75% (10Yr) and 6.7% (5Yr).

Dow Jones and Nifty lacks strength to rise and remains bearish for a fall towards 38200 and 23500-23300. DAX is seeing a corrective rise as expected. Nikkei has dipped slightly but the broader outlook will remain bullish while above the support at 31000. Shanghai may see a short corrective rise before resuming the fall again.

Dow (38763.45, -0.60%) has come down sharply, failing to sustain above 39400 for the second consecutive day. That keeps our bearish view intact to see 38200 on the downside. A rise above 39500 is needed to negate the fall.

DAX (17615.15, +1.5%) is seeing a corrective rise towards 17700 as expected. It can test 17800 and then resume the downtrend targeting 17000-16800 on the downside.

Nifty (24297.50, +1.27%) rose yesterday but failed to breach 24400. While below 24500, the bias is negative for the Nifty to reverse lower and break 24000 for a fall to 23500-23300 going forward.

Nikkei (35039.50, -0.23%) rose to test 35849.77 and has dipped a bit from there. A sustained break above 35500 can trigger a rise towards 37000. Bias remains positive to see a rise towards 37000 while above 31000.

Shanghai (2859.72, -0.35%) is hovering above the support at 2840. While that holds, a short term rise towards 2900-2920 might be seen. But the broader view will remain bearish for a fall towards 2800.

Crude prices have bounced back sharply in line with our expectations and can potentially target $ 78-80 (WTI) and $ 80-82 (Brent). Gold, Silver and Copper have dipped further and can extend the fall further towards 2400-2350, 26 and 3.85-3.80 respectively before a bounce back takes place. Natural Gas has risen well and can potentially rise further towards 2.2-2.5 in the near term.

Brent ($ 78.53) has surged to $ 78.87 in line with our expectation. It can extend the rise further towards $ 80-81-82.

WTI ($ 75.56) has bounced back sharply to $ 75.83 in line with our expectation. It can continue to rise further towards $ 78-80.

Gold (2427.50) has dipped further towards 2418.80 yesterday. A fall towards 2400-2375-2350 looks possible in the near term. Thereafter, we need to see if it bounces back towards 2450-2500 or falls further towards 2320-2300.

Silver (26.90) continues its downtrend. It can potentially target 26 before a bounce back to 28-28.50 takes place.

Copper (3.9505) has fallen in line with our expectation to 3.92 yesterday. The fall can extend further towards 3.85-3.80 before a potential rise to 4.2-4.3 takes place.

Natural Gas (2.0960) rose to 2.10 so far. A further rise towards 2.2-2.4 looks possible in the near term.

4:30 10:00 RBI Repo Rate
Expn – …Expected – …Previous 6.50%

4:30 10:00 RBI Rev Repo Rate
Expn – …Expected – …Previous 3.35%

4:30 10:00 RBI MSF
Expn – …Expected – …Previous 6.75%

Data Yesterday
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22:30 04:00 AU PMI
Expn – …Expected 47.4 …Previous -26.5 …Actual -19.5