What’s this week in global financial markets in the final lap of July?
Global equities in slippery track on elevated terrain with sell-on-recovery urge, Treasury yields down from safe haven & dovish outlook, USD beaten down below big picture and Gold in unrelenting mode...1/N
Global equities in slippery track on elevated terrain with sell-on-recovery urge, Treasury yields down from safe haven & dovish outlook, USD beaten down below big picture and Gold in unrelenting mode...1/N
It’s not the time to give up when pump-priming fiscal stimulus is not yet over, high probability of FED moving policy rate to sub 0% and positive outcome on C-19 vaccines; on the downside, yet to get grip on C-19 impact on economy, livelihood and lives, still in the dark...2/N
NASDAQ losing steam at 9850/10000-10850/11000 (post high punch 10839) is fine while finding comfort at 10058-10503 and S&P500 in comfort mode at 3130-3393 despite last mile resistance force, while DJIA fail to hold at top-quartile 27100-29568 but feel good at 25500-27500...3/N
US 10Y Treasury yield down at 0.55-0.65% but resisted at lower end of big picture 0.50/0.575-0.925/1%; Given that short term outlook is not negative, can’t rule out pull bias into 0.35-0.50% before push back into safe haven buy zone 0.65-0.825/1%; no worry, all’s well...4/N
USD Index DXY got expected breakdown at 94.65-95.75 (big picture 95/96.50-102/103.50) and set for 90.50-92.65 enroute to November 2014 range 87-88.50 (focus 88.50/90-97/98.50) Losing & unlocking of carry-trade flows and fear of sub-zero FED Fund rate are the major triggers...5/N
EUR/USD got upside break of big picture 1.05/1.0650-1.15/1.1650 and looks good for more into 1.1850-1.2150 (base lift from 1.0650 to 1.1350 target towards 1.2350-1.2650); it’s interesting to see ECB response to this u-turn currency appreciation; good for breather for now...6/N
USD/JPY relatively steady holding resilience at 105-106.50 down at tolerance range 105-110 and slip into 101-103.50 shouldn’t sustain and so is GBP/USD firm at 1.25-1.30 with pull bias into 1.3250-1.35; over all, don’t see USD weakness as set up of long term bearish trend...7/N
Gold (XAU/USD spot) hop-step-jump move from $1450-1485 $1650-1685 is at striking distance of landing target $1925-2000 (1451/1670 to 1906); prefer consolidation at $1750/1785-1965/2000, while Brent Crude hold steady around $42.50, midpoint of zoom-in $35-50 (of $15-70)...8/N
Indian context weigh heavily on run upto (a) @RBI policy outcome on 6th August (b) resolutions on C-19 moratorium portfolio (c) capital infusion strategy for PSU banks (d) monetisation of rising fiscal deficit, and more importantly (e) cutting reverse flow into R/R counter....9/N
#banknifty H-S-J at 16000-19500-23500 got done (16116-19518-23211) & into consolidation mode at 22350-22850; unfortunately, there’s nothing in favour to buy & hold bank stocks (even Big7 looks heavy on the bag, and less said the better on others); focus good at 21350-23150...11/N
10Y bond 5.79% 2030 sideways mode at 5.80-5.85% and repeat failure at 5.75-5.775% & @RBI OMOs at 5.90-5.95% are factors in play helping alignment of India-US 10Y yield spread ~5.15% against elevated spread of ~2.5% over call money rate; good to stay focused at 5.75-5.85%...12/N
USD/INR held resilient at 74.50-74.65 post 2-step trend down from 77 (12M $ carry supply at 79.65-80) and 76.35 (3M $ export hedge urge at 76.85-77) and below FY20 close 75.35 is ₹ advantage, notwithstanding @RBI $ bids and FPI exit urge (below June 2020 close ~75.50)...13/N
What Next on USD/INR is complex with contradictory forces in play (against trend & fundamentals), but don’t see value beyond 75.15-75.50 and good for consolidation at 73.50/73.85-75.15/75.50 till USD Index finds its comfort range; Keep 2019 close ~71:35 out of focus...14/N
EUR/INR upside break at 81.50-86.50 (post re-rated value from 76.50-81.50) is surprise - USD/INR not aligned to EUR/USD upside break at 1.15-1.1650; Given the cross-currency pair outlook at 1.1350/1.15-1.20 and 73.85-75.15, good for consolidation at 85/86.50-88.50/90...15/15
