Feb, 24, 2017 By Vikram Murarka 0 comments
Our last reading was for chances of slow decline towards 2.3-2.2% through Feb and March which did not happen, as Yellen possibly does not want to fall "behind the curve" and has kept even a March hike as a possibility. Going forward, it is quite possible that the Yield Curve may actually steepen in the coming months as US Inflation is moving up towards 2.0%, labour market conditions continue to strengthen and US data is doing relatively better than other countries.
US 10Yr (2.38) – Immediate Support at 2.34% and at 2.25%
It may break higher to target long-term Resistance at 3.00% (high of Dec 13) over the course of the year. Given that the market is pegging a March rate hike at 27%, there will be huge volatility in case the Fed moves early.
The uptrend is still the dominant trend but there could be chances of sideways movement till March 15th. Support seen at 2.25%.
US 30Yr (3.02) - Resistance at 3.06, 3.13 and 3.50% for Mid to Long Term
It now hovers just above its near-term Support at 3.00% so far. It continues to face medium term resistance (since 2010) near 3.13%, and a rise past 3.13%, if seen, can target 3.25% or maximum 3.50%, the long-term resistance since 1994.
US 2Yr (1.18) – Key Resistance at 1.26; 5Yr (1.87) –Could move up towards 2.50
Yields may remain sideways, or even rise a bit till the next FOMC meeting on 15th March. Apart from Fed action, yields could rise because of Selling of bonds by the Administration to fund the proposed fiscal push of US$1 trillion, as announced by Trump government.
On its part, the Fed is unlikely to be impetuous in cutting its US$ 4 trillion balance sheet by selling bonds. Its caution is evidenced by the fact that it has said it will stop re-investing funds from maturity of bonds only when it is confident of inflation and when Fed Rates are high enough that they can be pushed down again (to foil a slowdown) if needed.
One of the major global macros the Fed may keep an eye on is Brent, as that may have a direct impact on the CPI. Currently Brent trades near $56.34, but is inching higher. In case it rises past $58, it could gather steam and try to break above $60 also. Should that happen fast enough, it could push the Fed into hiking in March itself. While Brent remains below $58, the Fed might wait till June.
Forex reports by KSHITIJ.COM are based on dedicated and in depth analysis of various economic and financial parameters. Hence the judgement, quality, probability and reliability of these forex risk management views are quite high.
We are privileged to be associated with Kshitij as our Forex Advisor. Their valuable advice has helped Marico to redefine its forex management policies. We look forward to a long and rewarding association with them.
Kshitij is the only advisor that has taken a firm stand on the market at various times and at the same time they have always been willing to accept their mistakes gracefully.
Need Euro, Yen and Aussie forecasts for business costing and planning your hedges? You may also be interested in other long term forecasts
US Inflation has been following Crude prices closely. Both fell during Feb-Jul’17 before rising back again. Should Brent rise above 62 now …. Download Nov’17 Wallpaper
Our Nov-17 Monthly forecast is now available. To order a PAID copy, please click here and take a trial of our service.