DXY index is trading weak at 81.70 levels - ICICI Bank : Treasury Research

Report by WSJ Federal Reserve correspondent Hilsenrath suggested that the Fed is likely to revise guidance on monetary policy in the FOMC meeting next week, which aided expectations of continuation of current pace of asset purchases by the Central Bank.

The DXY index is trading weak at 81.70 levels as against previous close of 81.97, on account of an WSJ article by Fed watcher Hilsenrath wherein he has commented that the Fed is considering revising the forward guidance for hiking the policy rate to a possible lowering of unemployment rate threshold from 6.5% currently, thereby indicating that the Fed would maintain an accommodative policy stance for longer than the market is expecting. While there has been a strong FX market reaction, with the DXY index falling 0.4% in the previous session, only a 1 bps decline in US 10-year treasury yields, possibly indicates a liquidation of USD longs ahead of the FOMC next week. However, the markets have broadly shrugged off the strong US durable goods orders print released yesterday and is eagerly awaiting the outcome of the FOMC. Technically, intraday trend for the DXY is bearish with support and resistance at 81.40 and 81.95 respectively.

EUR/USD: The Euro is trading steady at 1.3280 levels after gaining 0.58% in the previous trading session amidst a broadly weak greenback. The currency hit an intraday high of 1.3295 levels yesterday post the release of the German IFO data that came out better than expectations. Meanwhile, the gains have been capped amidst persistent debt concerns, with the IMF asserting the need for ECB to reduce deposit rates and extend deadlines for some economies to achieve their austerity targets. The investors would closely watch the ECB policy due next week. The intraday trend for the Euro is bullish, with support and resistance at 1.3250 and 1.3310 respectively.

GBP/USD: The British Pound is holding its own around a one month high mark and is currently trading at around 1.5388 after gaining 0.50% in yesterday's trading session. The currency hit an intraday high of 1.5433 levels yesterday post the release of the Q2 GDP preliminary estimate that recovered to 0.6% QoQ versus 0.3% QoQ in the previous quarter. The investors would watch for the BoE policy due next week. The intra day trend for the GBP/USD cross is bullish with support and resistance at 1.5370 and 1.5425 respectively.

USD/JPY: The Japanese Yen is trading stronger, around 98.85 levels, in the close proximity of the two week high level of 98.76 reached earlier this morning, following around 1% rise in yesterday's session. Weakness in the Dollar coupled with value buying after the recent losses aided gains in the Yen. Meanwhile, Japan's CPI inflation rose by 0.2% YoY in June the fastest pace in five years. Technically, the intra day trend for USD/JPY cross is rangebound with support at 98.80 and resistance at 99.40.

USD/CHF: USD/CHF pair is currently trading lower at 0.9287 as against yesterday's close of 0.9298 on the back of a weaker Dollar this morning. Meanwhile, the EUR/CHF pair is trading little changed around 1.2340 levels amidst absence of fresh triggers. Expectations that the SNB would adhere to its 1.20 Franc ceiling after the Central Bank President Jordan reiterated the same earlier this week is likely to cap the upside in the currency. Technically, USD/CHF is expected to trade bearish with support at 0.9270 and resistance at 0.9325.

AUD/USD: The Australian Dollar is trading higher for the second consecutive day, currently at around 0.9273 levels following 0.9% rise in yesterday's trade. The Aussie has recovered from the recent lows on the back of value buying. A weaker Dollar this morning coupled with uptick in metal prices has also aided gains in the Aussie. However, the upside is likely to remain capped amidst expectations of rate cut by the RBA going ahead. Technically, we expect AUD/USD to trade ranged with support at 0.9220 and resistance at 0.9280

USD/CAD: The Canadian Dollar is trading firm in the early trade today, around 1.0273 levels after rising by around 0.4% yesterday to close at 1.0280. Supportive global risk sentiment coupled with weakness in the Dollar aided strength in the Loonie. Rise in prices of crude oil, Canada's largest export commodity further added to the gains. Technically, we expect USD/CAD to trade bearish with support at 1.0250 and resistance at 1.0300.

Source : Equity Bulls

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