More than the strong January NFP print, it was the US PMI
numbers which led to dollar strength in the NY session on Friday. Although ISM
was better than expected (in contrast to a disappointing December print)it
won’t change the outlook of an approaching slowdown in the US which has been
acknowledged by the FED. Therefore I would keep my trades in the direction of
the major trend which should be of a slowly and gradually weakening dollar.
Consequently a daily close for EURUSD below 1.1392 (55DMA, CMP 1.1440) and for
USDJPY above 110 (CMP 109.8), looks unlikely.
USDCNH move higher today morning has driven buying in
USDINR, driving NDF 1m 8p right. Budget was on expected lines and has given
rise to the usual questions about assumptions. Higher gross and net borrowing
number for FY20, have made bond markets look beyond fiscal as a percentage of
GDP, and consequently driven 10Y yields higher by 20bps. Overall I think the
budget and its impact are behind us now. The movement in CNH today morning
seems idiosyncratic given the lunar holiday and contradicting positive noise on
US-China trade talks. The fact oil prices moved higher by 2$ has also
contributed in USDINR opening at 71.60. I am still weary to trade a breakout in
USDINR and don’t expect a big move higher unless Gsecs see a further selloff.
CMP 71.67, Range 71.50-71.85.
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