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11 December 2017

Monday

64.20 a crucial level for the Rupee; Inflation forecasts move higher to 4.3-4.7% range.

Dollar index which was ranged through most of last week, gained on strong labour numbers as NFP numbers jumped to 228 K from an expected 200 K against a revised number of 244 K in October. Unemployment rate was steady at 4.1% though average earnings ticked down slightly to 0.2% against an expected 0.3%. DXY would have climbed higher but for the fact that a lower consumer confidence number capped gains. The crucial level remains 94.0 which if it breaks sustainably this month, the dollar is likely to head higher next year.   To this end, the FED meeting next week on the 12th and 13th as well as the self-imposed deadline of the Trump administration to clear the tax reform proposals in the House will be key drivers. A hawkish FED could drive the DXY higher while the tax reform proposals will pressure the near term yields higher. 

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  • Buy USD/INR Dec at 62.05 for target 62.20. Stop loss of 61.95
  • Sell EUR/INR Nov at 77.10 for target 76.90. Stop loss 77.25
  • Buy GBP/INR Nov at 97.85 for target 98.10. Stop loss 97.70
  • Sell JPY/INR 52.85 for target 52.52. Stop loss 53.03

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Rupee on a down trend on emerging market sentiment : US Equities lead the way.

  • 12.58 PM

    FX MARKETS

    RBI rate cut rumors vanished at the start of the week with the continued depreciation of the rupee being the key story. Experts opined that a rate cut at the time of sharp depreciation across emerging currencies in Asia a rate cut would not work well. The RBI chief, speaking at a banking conclave, was upbeat on growth citing a good monsoon was likely to see a tick up in rural demand and reiterated there was a room for rate cuts going ahead, provided there was further transmission of rates by banks. However the MOF is probably likely to continue to apply pressure for early rate cuts as growth momentum remains muted. .Stock markets were pressured by the risk off sentiment across markets as outflows from emerging markets continued to tick up. Domestic yields climbed at the end of the week, with the ten year benchmark yield at 7.77% against 7.75% at the start of the week.  Today it has opened at 7.83%. Meanwhile IMF has downgraded India growth forecast this year to 7% against the earlier 7.5%.     

    DXY slipped below its range over the last two weeks, as experts raised concerns on troubles in emerging market economies likely to raise the scepter of global deflation if it continued for longer. In the light of that, it would be difficult for the FED to effect, the token increase in US interest rates this year which was largely expected. This realization seems to have turned the market on its head with investors moving into a risk off mode with equities across the globe at record low levels. The S&P 500, has, for instance, given up all its gains in this year. This is despite the fact that the US data remains close to expectation or better.  Housing data was mostly better than expected with US Housing starts at an 8 year high. However jobless claims ticked up by 5000 to 277K and CB leading index fell to -0.2% against the earlier reading of 0.6%.  Flash manufacturing PMI was at 52.9 versus 53.8.

    The Euro climbed higher, moving above 1.12 at the end of the week and opened at 1.45 at the start of the week, as it appreciated against the dollar as did the Yen and CHF on possible unwinding of carry trades. Data from the Eurozone remained close or better than expectations this week, but was ignored in light of the lack of movement in GDP and CPI data. Eurozone current account surplus improved to $25.4 billion even as the Greek PM Tspiras resigned at the weekend, with hopes of coming back stronger in a snap election to be held on Sep 20. He faces strong opposition from the members of his own party, despite the fact that Greece has received parliamentary approval for its third bail out plan.  The PMI numbers across the Eurozone weres better except for French manufacturing PMI which stayed below the expansion point of 50 at 48.6.

     The Yen stayed higher, moving down only at the end of the week on safe haven buying on account of troubles in China as the Caixin Manufacturing PMI came in at 47.8 versus an expectation of 48.2. Chinese equity markets continue to fall even though the Yuan depreciation of the previous week has stabilized, with higher fixings for Yuan through the latter half of last week.  However the risk off sentiment it has set off seems to have a mind of its own and there does not seem any let up in capital outflows from China and other emerging markets, despite the fact the dollar has actually become weaker this week. 

    The outlook on oil and commodities continues to hinge on China as commodity currencies come under increasing pressure.  A small window on US exports of oil creaked open with the government allowing US oil companies to do a 1:1 swap of light sweet crude with Mexican oil companies doing refinery operations. However the protectionist lobby on oil remains strong and it is unlikely that much other leeway will happen in a hurry.  The Middle East continues to pump output at record levels and with Iran coming on stream, investors worry about a supply glut at a time of falling demand.  Inventories in the US are continuing to climb as the driving season in the US comes to an end. Currently Crude quotes at $ 40.89 and Brent is close to $44.70.

    Gold moved higher on safe haven buying as global equities tanked with Dow falling to 10%  over the week accompanied by falling yields across emerging markets. Gold moved up sharply to trade at $1158 and is likely to keep climbing as VIX Index’s move higher across the globe.


    MARKETS LAST WEEK (Aug 17-21)

    PAIR EXPIRY OPEN HIGH LOW CLOSE % CHG
    USD/INR 27th Aug 15 65.27 66.01 65.21 65.94 1.24
    EUR/INR 27th Aug 15 72.35 74.47 71.90 74.34 2.09
    GBP/INR 27th Aug 15 101.99 103.67 101.99 103.32 1.44
    JPY/INR 27th Aug 15 52.46 53.86 52.43 53.78 1.72

      FUTURES RBI REF RATE 21/08/2015 OPEN INTEREST Aug 2015) VOLUME
    (ALL CONTRACTS )
    VOLUME
    (RS. CRORE)
    USD/INR 65.94 65.8298 24,34,412 74,19,600             48,692.98
    EUR/INR 74.34 74.2692 89,346 299,834 21914.08
    GBP/INR 103.32 103.3897 65,761 208,845 2083.08
    JPY/INR 53.78 53.5500 12,757 67,510 358.08









    USD/INR ARBITRAGE on Aug 21, 2015
      SPOT 1 MONTH 2 MONTH 3 MONTH
    NDF 65.86 66.28 66.56 66.90
    FORWARDS 65.80 65.89 66.26 66.64
    FUTURES   65.94 66.30 66.65

    TECHNICAL SUPPORTS AND RESISTANCES (AUG 24–28)
      PIVOT S2 S1 R1 R2 Outlook
    USD/INR 64.85 64.92 65.43 66.23 66.52 UP
    EUR/INR 71.94 71.00 72.67 75.24 76.14 UP
    GBP/INR 100.98 101.31 102.32 104.00 104.67 Up
    JPY/INR 52.02 51.93 52.85 54.28 54.79 UP

    USD/INR TECHNICALS


     
    In our previous comment we had mentioned that, USD/INR continues to move in a positive formation and it is moving with an upward bias. As far as prices are moving crossing its previous highs the probability for the pair to test the level of 66 is likely with support placed at 64.80 levels.
    Prices made a high of 66.01 last week thus achieving our mentioned level. The bias still is positive and can move higher till 66.50 levels in the current week. The support now will be at 65.40 on the downside.

    EUR/INR TECHNICALS



    In our previous comment we had mentioned that, prices are  on the brink to cross its previous high which will open positive possibilities which will push prices higher till 74 levels going ahead.  The pair has protected its previous low and will probably make ne immediate high. RSI is above 50 which gives positive signal.
    Prices crossed its previous high thus achieving our mentioned level of 74. Prices closed above the 50 SMA which opens further positive possibility. The revised target will be 75 for next week with support placed at 73.80 levels.

    GBP/INR TECHNICALS


     
    In our previous comment we had mentioned that GBP /INR bounced from the support of the moving average and it shows a perfect example of a bullish moving average crossover which is a positive sign. Prices are making a higher highs and higher lows which is a positive formation. It can test the level of 102.50 in near term with support at 101 levels.
     
    It made a high of 103.67 levels thus achieving our level of 102.50. The overall outlook continues to be positive with the target of 105 in coming week. The support will be at 102.50 levels on downside.
     
    JPY/INR TECHNICALS


     
     Prices broke the rectangle pattern which opens positive possibility. The over all outlook continues to be positive as the pair can move to  55 levels in the near term. The support will be at 52 levels on the down side. However, RSI is inching towards 70 but MACD has given a fresh buy signal.

    GLOBAL OUTLOOK (AUG 24–28)
     
     
     
     
     
     
     
    SPOT PR. CLOSE % CHANGE S2 S1 R1 R2
    EURUSD 1.1278 1.1173 0.94 1.0800 1.1000 1.1400 1.1500
    GBPUSD 1.5677 1.5636 0.26 1.5250 1.5410 1.5710 1.5900
    USDJPY 122.72 124.08 -1.10 120.00 121.00 123.50 125.00
    Gold 1153 1119 3.04  1070 1130 1170 1200
    Silver 15.4 15.47 -0.45 13.90 14.50 15.50 15.80
    WTI 41.14 42.28 -2.70 38.00 40.00 45.50 47.00




















    ECONOMIC DATA RELEASES (AUG 24–28)
    DATA RELEASES FORECAST PREVIOUS IMPACT
    August 25 , Tuesday      
    German Final GDP q/q 0.4% 0.4% Medium
    France Employment Level 4.24M 4.23M Medium
    German Ifo Business Climate 107.6 108 Medium
    U.S HPI m/m 0.4% 0.4% Medium
    U.S S&P/CS Composite-20 HPI y/y 5.1% 4.9% Medium
    U.S Flash Services PMI 54.1 55.7 Medium
    CB Consumer Confidence 92.8 90.9 Medium
    U.S New Home Sales 512K 482K Medium
    U.S Richmond Manufacturing Index 9 13 Medium
           
    August 26 , Wednesday      
    Aus Construction Work Done q/q -1.50% -2.40% Medium
    RBA Gov Stevens Speaks     Medium
    France UBS Consumption Indicator   1.68 Medium
    U.K BBA Mortgage Approvals 46.0K 44.5K Medium
    U.K CBI Realized Sales 19 21 Medium
    U.S Core Durable Goods Orders m/m 0.30% 0.60% Medium
    U.S Durable Goods Orders m/m -0.50% 3.40% Medium
    FOMC Member Dudley Speaks     Medium
    U.s Crude Oil Inventories   2.6M Medium
           
    August 27 , Thursday      
    Aus Private Capital Expenditure q/q -2.50% -4.40% Medium
    German Import Prices m/m -0.30% -0.50% Medium
    U.K Nationwide HPI m/m 0.40% 0.40% Medium
    Euro M3 Money Supply y/y 4.90% 5.00% Medium
    Euro Private Loans y/y 0.70% 0.60% Medium
    U.S Prelim GDP q/q 3.20% 2.30% High
    U.S Unemployment Claims 275K 277K Medium
    U.S Prelim GDP Price Index q/q 2.00% 2.00% Medium
    U.S Pending Home Sales m/m 1.30% -1.80% High
    U.S Natural Gas Storage   53B Medium
           
    August 28 , Friday      
    U.K GfK Consumer Confidence 4 4 Medium
    Japan Household Spending y/y 0.90% -2.00% Medium
    Japan Tokyo Core CPI y/y -0.10% -0.10% Medium
    Japan National Core CPI y/y -0.20% 0.10% Medium
    Japan Unemployment Rate 3.40% 3.40% Medium
    Japan Retail Sales y/y 1.10% 1.00% Medium
    France GDP q/q -0.10% -0.20% Medium
    German Prelim CPI m/m -0.10% 0.20% Medium
    Spanish Flash CPI y/y -0.10% 0.10% Medium
    U.K Second Estimate GDP q/q 0.70% 0.70% Medium
    U.K Prelim Business Investment q/q 1.60% 2.00% Medium
    U.K Index of Services 3m/3m   0.40% Medium
    Italian 10-y Bond Auction     Medium
    U.S  Goods Trade Balance   -62.3B Medium
    U.S  Core PCE Price Index m/m 0.10% 0.10% Medium
    U.S  Personal Spending m/m 0.40% 0.20% Medium
    U.S  Personal Income m/m 0.40% 0.40% Medium
    U.S Revised UoM Consumer Sentiment 93.2 92.9 Medium
    U.S Revised UoM  Inflation Expectations   2.80% Medium
                   
     


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