Dollar index is witnessing much needed pullback from 95 levels. 29th May was also the 11th day up from the last main bottom. This puts the index in the window of time for a closing price reversal top. A rally of this size and duration often ends with a dramatic closing price reversal top. The reason behind rally in DXY was the political scenario in Italy where chances are high of re-election. Investors are spooked with the results and Italian Yield has jumped considerably owing to fear of sovereign default. Euro yesterday rebounded from 10 month low as report media suggested Italy’s Center and Right parties might try to iron out their differences and form government. DXY Future has also broken the trendline from 17th May so we may see the downside get extended till 93 where it has cluster of supports. USDINR Future has support at 67.48 and any breakdown below that level may propel our currency to strengthen further till 67.20. However if USDINR sustains above 67.48, then expect prices to weaken further till 68.
Gold Speculators drop bullish bets for 2nd week, down 4 out of last 5 weeks, this is positive as gold is not overcrowded with bulls. 10 Yr US Treasury Yield fell from 3.127 to 2.769 from 19th May to 29th May. This number may look small but its 11% decrease. This is the reason why gold is rising despite increase in US Dollar. Bullish sentiment currently sits at just below 30% bulls and near the same levels as July 2017 and mid-December 2017. The price action does not indicate any pessimism or fear. Gold is hovering near $1300 and has strong support at $1280 and minor resistance at $1326. In Rupee term, gold is looking strong thanks to weak INR. Any short term trend reversal in MCX may only come below 31100.
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