The Dollar Index trades lower as markets price in the widely expected Democratic gains in the US mid-term elections (DEM 45, REP 35 so far), which could keep downside pressure on the index. It may slip towards 101.00 while below 101.50, and a break below 101 would turn the medium-term view bearish. Friday’s US NFP needs a close watch- a higher-than-expected release could lift the index and raise December rate-hike expectations, while a weaker one would add to the pressure. The index is likely to stay volatile this week but hold above 101. On the softer dollar, EURUSD is moving towards 1.1250 (maximum upside 1.13) before a reversal, Dollar-Yen may ease towards 157, EURJPY towards 177–176 while the Pound could test 1.35 to the upside. The Aussie may dip towards 0.69 while USDCNY could rise towards 6.70. USDINR may test support near 94.50 (and head towards 94 on a break below), while EURINR is likely to trade within 106.80–105.70.
Dollar Index (101.394) has fallen amid the mid-term, where the widely expected view is to see the Democrats to secure both the House, which could weigh on the Dollar Index and keep the downside pressure on. However, crucial US NFP data on Friday needs close watch; a higher-than-expected release could support the index and take it higher, increasing the expectations of a Dec-rate hike. Else, a lower than expected release, if seen can further weigh down on the index. The index could be volatile for the rest of the week but likely to remain above 101.
EURUSD (1.1239) is moving up toward 1.1250, as expected, on a falling Dollar Index ahead of the US mid-term results. A maximum of 1.13 can be seen on a break above 1.1250 on the upside before a reversal takes place in the near term.
Dollar-Yen (157.81) tested 158.768 yesterday but has declined sharply along with the decline in the Dollar Index. We may expect the spot to move lower for the rest of the week towards 157, before any rebound is seen next week. EURJPY (177.31) has faced rejection while below 178, in line with expectations. A further dip to 177-176 can be possible in the near term.
EURINR (106.3411) has been volatile within the 106.80-105.70 region. The trade may continue within this zone unless a sharp breakout is seen on either side of the range.
USDCNY (6.6798) has risen further. A sustained rise above 6.68 can open up chances of a rise to 6.70 in the coming days.
Aussie (0.6964) is likely to decline towards 0.69 in the near term before a rebound back towards 0.70 or higher is seen again. On the other hand, Pound (1.3458) has been rising well and can test 1.35 before facing rejection from there in the coming days.
USDINR (94.6312) closed lower yesterday and has scope to test immediate support near 94.50. A break below this, if seen, can drag it lower towards 94. Watch price action near 94.50 today.
The US Treasury Yields have come down sharply from their highs. The near-term resistance is holding well. That keeps the downside open to test their support first before the broader uptrend resumes. The German Yields have bounced but may not sustain. They have room to dip further before a sustained reversal happens. The 10Yr GoI can dip more from here before reversing higher again.
The US 10Yr (4.95%) and 30Yr (5.32%) Yields have come down from their highs. The resistance at 5% (10Yr) and 5.4% (30Yr) is holding well. That keeps the downside open to see 4.85% (10Yr) and 5.2% (30Yr) first. Thereafter a rise back to 5.15%-5.2% (10Yr) and 5.4% (30Yr) can happen.
The German 10Yr (3.33%) and 30Yr (3.69%) Yields have bounced back. Need to see if this sustains. A dip to 3.25% (10Yr) and 3.6% (30Yr) is still possible before a rise back to 3.7% (10Yr) and 4%-4.1% (30Yr) happens.
The 10Yr GoI (7.3012%) has come down from the high of 7.3614%. A test of 7,25%-7.2% is possible before the yield reverses higher again.
Global equities remain mixed. The Dow Jones faces downside risks towards 51,000 amid US midterm election results favouring Democrats, with resistance near 52,000. The DAX is struggling below 26,000, keeping the downside outlook towards 25,500 intact. Nifty holds strong above 23,600, with scope towards 24,000. Nikkei has slipped below 62,000 and can fall towards 60,500-60,000. Shanghai looks weak around 3,600, with a decline towards 3,500 still possible.
Dow (51786.72, -0.38%) tested a low of 51593 as expected before closing higher. Immediate resistance is seen near 52000. With US midterm election results coming out today and early results showing Democrats taking the lead, the index could break below 51500 and fall towards 51000.
DAX (25864.62, -0.45%) has opened lower and managed to recover well to the current level. However, it is struggling to stay above 26000 and keeps our view of a decline towards 25500 intact in the coming session while it remains below 26000.
Nifty (23810.85, +1.58%) has risen well to close above 23800 as expected. It may open lower today and needs to hold above 23600 for a rise towards 24000 over the coming week.
Nikkei (61232.77, -2.93%) has fallen sharply below our estimate of 62000 to the current level. If it sustains below 62000, there is room to fall further towards 60500-60000 in the coming weeks.
Shanghai (3604.10, -0.10%) managed to come back above 3600 contrary to our view but looks weak above this level and keeps the possibility open for a decline towards 3500 in the coming week.
Crude oil prices turned lower on Tuesday amid diplomatic hopes. Brent and WTI are testing key supports at 100 and 92 ahead of US midterm election results. In precious metals, Gold remains biased toward 3850–3800 while capped under 4000, while Silver stays vulnerable to further drops toward 45. Meanwhile, Copper broke below 6.4 support to target 6.3–6.2, and Natural Gas continues to range-trade between 2.7 and 3.2.
Brent ($ 103.32) and WTI ($ 95.56) prices gave up overnight gains and turned lower on Tuesday amid hopes that diplomatic efforts could resolve the US-Iran conflict, which has disrupted Middle Eastern fuel supplies. Prices tested key support levels near 100 and 92, respectively. It remains to be seen whether these supports hold to trigger a bounce back or break to extend the decline, with today’s midterm election results expected to drive the next directional move.
Gold ($ 3948.80) remains vulnerable to a further decline towards 3850–3800 in the near term as long as it continues to trade below 4000.
Silver ($ 49.66) remains susceptible to a further decline towards 45 in the near term.
Copper ($ 6.35) has broken below support near 6.4 contrary to our expectations and could now fall towards 6.3–6.2.
Natural Gas ($ 2.8560) is expected to continue trading within a range of 2.7–3.2 for some time.
22:30 4:00 AU PMI
Expectation…1.4 ExXpected 0 …Previous -8.7
5:00 10:30 IN Services PMI
Expected 56.2 …Previous 56.2
13:15 18:45 US ADP EMP
EXpected 68 …Previous 90
13:30 19:00 US Trade Balance
Expectation…-106.6 EXpected -107.9 …Previous -105.6
YESTERDAY’s DATA:-
—————-
RBA Meeting
…EXpected 4.85 …Previous 4.60 …Actual 4.85
CH CPI
Expectation…1.4 EXpected 0 …Previous 1.0
