Markets are in a mild risk off mode till now, if the Dow breaks 24000 (200 DMA) and gives a weekly close lower then we can be in for a large down move. Over the last few years any market participant would have learned that it does not pay to be equity bear, therefore the 200DMA is more of an opportunity to buy Risk for now, unless a breakout is confirmed. Potentially the reason could be a U turn by US on the trade/investment sanctions on China and Europe. Trump could easily do this and shift focus to Iran as his new punching bag. FED speakers and data would not be consequential for now as trade news is at the forefront.
USDCNH continues to drive Asian EM currency losses while the fragile EMs (TRY, ZAR, MXN, BRL) are relatively more stable. USDINR 1m NDF is trading at 34p which shows increased offshore buying since yesterdays 28p. India 10Y yield has increased again to 7.87 as FIIs continue to pull out consistently from debt and equities. A break of 68.90 and daily close could lead to panic buying in the pair and therefore I would expect RBI to prevent the move. The move is unlikely to happen without dollar index crossing 96 levels. Today also we are seeing intervention like price action although other factors continue to work against INR. CNH needs to be watched closely for further direction in INR. A daily close above 68.45 should quickly show 68.90 the next day. During the day RBI would ensure that runaway depreciation doesn’t happen. CMP 68.55, Range 68.60-68.40.
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