The US CPI came lower, in line with market expectations and the Dollar Index is moving towards 102 while above 101.25. The Euro tested 1.10 as expected and markets wait to see what the ECB does today in its policy meeting. Watch price action closely around the current levels. USDJPY and EURJPY extend their fall further on Hawkish remarks of the BOJ Policy Board member Junko Nakagawa, hinting further rate hikes if the economy performs as expected. We expect the downside to be limited to 140-139 (USDJPY) and 156-154 (EURJPY) respectively in the near term. Aussie and Pound need to rise past 0.67 and 1.31 respectively in the near term, else are likely to fall back towards 0.66 and 1.30-1.2950. USDCNY is attempting to rise past 7.12. Overall, it could trade within 7.08-7.12/14 region for some time. EURINR is likely to fall towards 92.50-92 in the near term while below 93. USDINR can continue to trade between 83.90 and 84.00. Important data releases to watch would be IN CPI and US PPI release today.

US CPI Y/Y% for Aug-24 came out at 2.5%, lower than 2.92% seen in July-24 thereby dampening the prospects of a 50-bps rate cut in the upcoming Fed Sep-24 meeting next week. The Dollar Index (101.76) can rise to 102 in the near term. Thereafter, it has to break past 102 to move higher else, it can fall back within the 100.50-102 zone.

EURUSD (1.1011) tested 1.10 as expected before recovering slightly from there. The ECB meeting scheduled today would be important to watch as to whether the pair rises back from 1.10 or extends the fall to 1.0950 in the coming sessions. Repeating from the previous reading, although the market expects a rate cut, it may alternately also keep rates unchanged as the EU inflation is within reach of their 2% target and if they would want to wait to see what the FED does next week.

Despite the Dollar strength, the Dollar-Yen (142.45) and EURJPY (156.84) tested 140.71 and 155.46 before rising back. BOJ’s Policy Board member Junko Nakagawa stated: ‘Monetary easing will be adjusted if the outlook for Japan’s economy and inflation is realized’ which led to a temporary strength in the Yen. We expect the downside to be limited to 140-139 (USDJPY) and 156-154 (EURJPY) respectively from where a bounce is possible.

USDCNY (7.1195) is attempting to rise past 7.12. We need to be cautious around the current levels as failure to rise past 7.12 can drag it back towards 7.10 or lower. Overall, we expect the downside to be limited to support at 7.08 for now and hold a near-term range of 7.08-7.12/14.

Aussie (0.6674) tested 0.6622 on the downside before recovering from there. Unless a rise past 0.67 is seen, the overall view remains bearish to see a fall towards 0.66 or lower in the near term, Similarly, Pound (1.3036) tested 1.30 before bouncing back. Still, a rise past 1.31 will be needed to become further bullish, else it can become vulnerable to test 1.30-1.2950 again soon.

USDINR (83.9825) is likely to trade within the narrow 84.00-83.90 region for the near term.

EURINR (92.4632) failed in its attempt to rise past 93 and until a decisive break past it is seen, the outlook appears bearish to 92 in the near term.

The US Treasury yields have bounced after the inflation data release. While the Headline CPI came in lower, the Core CPI showed an uptick causing the yields to rise. The trend is down. So, any rise in the yields will be short-lived. We can expect the yields to resume the downtrend eventually. The US Headline CPI for August came at 2.59% (YoY), down from 2.92% in July. The Core CPI rose to 3.27% from 3.21% over the same period. The German yields continue to fall and are keeping intact our bearish view.The GoI has declined, breaking its support as expected. The downtrend has resumed, and the yield can fall further.

The US 10Yr (3.66%) and the 30Yr (3.97%) yields have risen well after the inflation data release. This could just be a corrective bounce within the broader downtrend and can be short-lived. While below 3.8% and 4% (10Yr) and 4.1% and 4.3% (30Yr) the bearish view is intact to see 3.5% (10Yr) and 3.8% (30Yr) on the downside.

The German 10Yr (2.11%) and the 30Yr (2.39%) yields have come down further. The bearish view is intact, and the yields are coming down towards 2% (10Yr) and 2.2% (30Yr) in line with our expectation.

The 10Yr GoI (6.8271%) has declined breaking the support at 6.84% as expected. That keeps intact our bearish view of seeing 6.8%-6.75% on the downside.

Dow Jones indeed fell to around 40000 but also bounced back sharply from there to close above 40800. It looks likely to breach above its resistance at 41000 now and target 42000. DAX remains bearish for the near term. Nifty has come down below 25000 and looks ranged between 25200-24800. A break on either side of the range will bring clarity on its direction. Nikkei has bounced back sharply but has to overcome the resistance overhead to extend the bounce further or else it may trade sideways for a while. Shanghai can rise to 2750-2765 while above 2700.

Dow (40861.71, +0.31%) has risen back sharply from the low of 39993. The strong bounce leaves the bias positive for the Dow to breach 41000 and clear the way for a rise to 42000. We will have to wait and watch.

DAX (18330.27, +0.35%) is oscillating around 18300 over the last couple of days. While below 18600-18700, the bias is negative for a fall to 18000 and even 17500.

Nifty (24918.45, -0.49%) has come down. Need to sustain above 24800 to keep the chances alive to breach 25200 and rise to 25500. A break below 24800 will be bearish to see 24500 and lower. Have to stay out and watch.

Nikkei (35253.43, -0.83%) has bounced back sharply above 36500 after testing a low of 35253.43. It has to surpass 37000 to rise towards 38000-38500. Else it may trade sideways between 37000-35000 for some time.

Shanghai (2723.39, +0.03%) has bounced back slightly after testing a low of 2710.62. If it sustains above 2700, a rise towards 2750-2765 could be seen. In case of any break below 2700, if seen, can extend the fall towards 2680-2650.

Brent and WTI have recovered well and might see a rise towards its resistance at $ 74-75 and $ 70-71. Gold, Silver and Natural Gas has scope to rise towards 2600/2610, 29.50 and 2.5 in the near term. Copper has risen towards its upper end of the range and remains bullish to see a break on the upside and rise further. Watch out for ECB meeting today where the central bank is expected to do a 25 bps rate cut.

Brent ($ 70.91) has recovered a bit from a low of $ 69. If the bounce sustains, a rise towards $ 74-75 could be seen again. But a fall towards $ 65 cannot be ruled out in the medium term.

WTI ($ 67.53) has bounced back towards $ 68 as the support at $ 65 held well. While above $ 65, a rise towards $ 70-71 might be seen.

Gold (2540.30) rose to a high of 2558 yesterday and has dipped slightly from there. Chances of rise towards 2600-2610 cannot be ruled out while it remains above 2500-2450.

Silver (28.92) has seen a high of 29.22 so far. View remains bullish for a rise towards 29.50, the upper end of the 28-29.50 range. In case a break above 29.50, if seen, can extend the rise to 30.

Copper (4.1635) has moved up towards the upper end of the 4.00-4.20 range. Bias is positive to see a break above 4.2 and rise towards 4.4 in the coming sessions.

Natural Gas (2.2720) has broken above the upper end of the 2.0-2.3 range as expected and has seen a high of 2.3250 so far. A further rise towards 2.4-2.5 looks likely from here.

11:45 17:15 ECB Mtg
Expn 4.20% …Expected 4.00% …Previous 4.25%

12:00 17:30 IN IIP
…Expected 4.9% …Previous 4.2%

12:00 17:30 IN CPI
Expn 4.00% …Previous 3.54%

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

12:30 18:00 US PPI ex Food & Energy (MoM)
Expn 0.4% …EXpected 0.2% …Previous 0.0%

DATA YESTERDAY:-
—————
UK Trade Bal GBP (Bln)
expn -20.0 GBP(bln) …Expected -18.0 GBP(bln) …previous -18.9 GBP(bln) …Actual -20.0 GBP(bln)

US CPI (MoM)
Expn 0.3% …Expected 0.2 % …Previous 0.2% …Actual 0.2%

US Core CPI (MoM)
EXpn 0.2% …Expected 0.2% …Previous 0.2% …Actual 0.3%