US CPI data came in weaker than expected, surprising the markets and leading to a sharp depreciation in the Dollar Index against the major currency baskets. The Dollar Index and Euro may extend to 103 and 1.0950 if the current momentum is intact, otherwise may face reversal in the next few sessions. EURJPY remains bullish towards 165/166. USDJPY is holding below resistance at 152 and may bounce from 150. Failure to bounce from 150 may drag it towards 148. Aussie rallied sharply from 0.6350 and could trade within 0.6350-0.6550. Pound may fall from 1.2550/1.26 in the near term.
USDCNY is bearish towards 7.22/20 and below 7.28/30. USDRUB can bounce from 90/89 towards 93/94, otherwise a break below 89 is needed for further bearishness. EURINR can be bullish towards 91/92. USDINR should fall below 83.10 today on strength in the Euro and Chinese Yuan, but we will have to see if the RBI allows the fall.
US Treasury yields fell sharply after yesterday’s inflation data. The US headline CPI rose 3.23% (y/y) in October, down from 3.69% a month earlier. The Core CPI rose 4.02% (YoY), down from 4.13% in the same period. Yields are approaching key support levels that may be tested. Price action thereafter will need to be watched closely for a reversal. German yields have fallen sharply and have more room to fall from here. The 10Yr GoI remains vulnerable to a decline as long as it remains below its immediate resistance. The 5Yr GoI looks mixed and may oscillate in a narrow range.
Dow Jones looks bullish in the near term. DAX has risen above 15500 and a further rise above 15650 is required to negate our bearish view. Nifty can bounce back taking cues from global markets. Nikkei has entered the crucial resistance zone and can witness a fall if it holds well. Shanghai has rallied back as support at 3025 held well and looks bullish to target further highs.
Brent and WTI have fallen after hitting their immediate resistance at $84 and $80 respectively, and while below this resistance, prices can fall further. Gold, silver and copper have rallied after the release of lower than expected US CPI which came in at 3.23% for Oct 23rd versus market expectations of 3.78%. Natural gas is expected to remain range bound below 3.30.
