Chatter around possible Bank of Japan intervention sent USDJPY sharply lower, dragging the Dollar Index ahead of today’s US non-farm payrolls release. The euro is pushing towards 1.17, while EURINR is headed for 110-110.50; EURJPY has dropped below 182 and is pointing to 180. AUDUSD is seen rising towards 0.73 and GBPUSD could test 1.3450 before a rebound, while USDCNY is trending to 6.71/70. The Indian rupee is projected to strengthen to 94 before reversing.
US Treasury yields are described as higher and steady with scope for further gains, with today’s unemployment data in focus. German yields are hovering near key resistance and need follow-through to extend higher, otherwise a pullback is flagged. India’s 10-year GoI yield has eased but remains above support; near-term tone is positive, though an intermediate dip is anticipated. In equities, the Dow has cleared 53,000 and is eyeing 54,500-55,000 if it breaks 54,000; the DAX targets 26,500, while Nifty risks 23,600 if 23,800 fails, Nikkei points to 62,000 and Shanghai is seen range-bound at 3,850-4,000. Brent targets $100 and WTI $95; gold needs $4,600 to aim for $4,700-$4,800, silver must clear $70 to reach $75-$80, copper holds $6.50-$6.80 and natural gas needs $3.00 to push $3.25-$3.50. Vikram’s background cites managing $1.2 bln of FX exposure since starting in 1991.
Currency and Fixed Income Market Strategy
We advise currency derivative traders to prepare for heightened volatility in yen-crosses following another suspected intervention by the Bank of Japan, which has already pushed USDJPY down. Given the EURJPY’s sharp plunge below 182, we recommend holding short positions targeting the 180 level, while positioning for a weaker US Dollar Index ahead of today’s crucial payrolls report. We also see room for the Euro to test 1.17 and the Indian Rupee to strengthen toward 94 before facing a reversal.
In the debt markets, we maintain a bullish outlook on US Treasury yields and suggest buying any short-lived dips triggered by today’s employment data. German yields are hovering at critical resistance, so we advise waiting for a confirmed breakout before building long positions, while preparing for a brief dip in the Indian 10-Year GoI yield. Historically, yield spikes during late-summer trading cycles present excellent entry points for medium-term traders.
Equities and Commodity Market Outlook
For equity derivatives, we recommend buying call options on the Dow Jones as its break above 53,000 opens the door for a run toward 55,000. Conversely, we suggest shorting or buying puts on the Nikkei, which looks structurally weak and appears headed down toward the 62,000 mark. In emerging markets, we advise hedging long Nifty positions, as a failure to hold the 23,800 support level could quickly accelerate a decline to 23,600.
In the commodity space, we suggest staying long on Brent crude as tight global supplies and OPEC output discipline push prices toward the $100 milestone. For precious metals, we should hold back on new long positions in gold until it securely closes above $4,600, which would signal a broader rally toward $4,800. Meanwhile, we advise keeping a close eye on natural gas, keeping positions neutral until a clear break above $3.00 is achieved.
