Oct 1, 2016 - RBI credit policy awaited amidst geo political risk ... -INR experiences roller coaster ride. RBI policy awaited. -US Nonfarm payrolls is a key data to be watched. -Global markets are jittery over European banking stress. .... details please visit @ www.gwcindia.in/disclaimer ( Disclaimer & Privacy Policy ).
FX WEEKLY REPORT
01/10/16
RBI credit policy awaited amidst geo political risk Highlights: -GLOBAL and INDIAN MARKET DEVELOPMENTS -DATA HIGHLIGHTS AND FX MARKET DEVELOPMENTS -TECHNICALS -STRATEGY FOR HEDGING AND SUGGESTED PORTFOLIO -DATA AND EVENTS FOR NEXT WEEK. Major economic events: -INR experiences roller coaster ride. RBI policy awaited. -US Nonfarm payrolls is a key data to be watched. -Global markets are jittery over European banking stress. Important developments during last week: INR closed at 66.61 as against prior week close of 66.65 . USDINR swung in the 66.40-66.92 range as the pair was rocked by Indian surgical strikes at POK. INR recovered as RBI sold USD on Thursday. INR gained further as inflows attributed to telecom spectrum auction gathered pace on Friday. Market would focus on RBI credit decision on Oct 4 th. Downward movement in inflation and falling IIP data may prompt RBI to cut rates. RBI Governor hinted that growth may take a priority in upcoming monetary policy decision. Govt has appointed
3 new members to MPC. RBI is meeting on Oct 4 th and a new MPC committee will decide on rate decision for the first time in Indian monetary policy decision. Notwithstanding Friday’s calmness in India-Pak LOC, markets are wary of new developments that could provoke counter actions from both sides. Indian industry and political parties have welcomed Indian Govt’s military action to combat terrorism from across the border.
FII’S invested USD 1.56 mn in Indian Equities in Sep . FII’S are net buyers of USD 7.89 bn worth of Indian Equities in this calendar Year. FII’S bought USD 1.4 bn Indian debt securities in Sep . FII’S have bought nett USD 423 mn Indian debt securities in this calendar Year. USDINR seems to have made an important bottom at 66.32. Expect USDINR to trade in the 66.30-67.25 range for some more period, before new developments guide INR to a new trajectory. Global developments: Concerns over German banks and a surprise production cut announcement by OPEC provided some volatility to financial markets this week. Equity markets were up following the OPEC announcement but sold off dramatically on Thursday as anxieties mounted over the health of German Banks. Reassuring statements from European regulators and bank CEOs helped push equities back up on Friday. Major upcoming risks are US election, Fed rate hike in Dec, possible deterioration in financial health of some European banks. In recent polls, Clinton is leading Trump by only 3 points which is subject to error. If the fight toughens, markets would react negatively. OPEC nations have reached a preliminary agreement to curb oil production to 32.5 mbpd from the present level of 33.2 mn barrel per day. This has led to a rally in Oil prices. However, oversupply is likely to cap Oil rally and stabilize WTI prices in the USD40-USD 50 range for some more period.
US economic data was mixed. While last quarter GDP was revised upwards, consumer spending and business investment continued to decline. BOE Dy Governor said that Brexit uncertainty is nowhere near over and "it's too early to ultimately assess what the impact is". BOE Dy Governor also added that "BOE should rather be on the front foot and act preemptively, rather than be on the back foot and do too little too late." Important developments for next week: -RBI credit policy -US Nonfarm payrolls Important levels to watch for are: 1) EUR/USD: 1.11/1.09 on the downside and 1.1330/1.1425 on the upside. 2) USD/INR Supports: 66.32 on the downside and 67.14/67.25 on the upside.
Market developments: -Indian Nifty closed at 8611. -Gold closed at 1315 and WTI Crude closed the week at USD 47.97. -Indian 10 Year G-SEC closed the week at 6.817%. US 10 Year Yield closed at 1.62%. Data Highlights of last week: -US new home sales climbed to 609k. -US consumer confidence climbed to 104.1 and house price index climbed 5% y/y. -US durables order was flat m/m and core durables order declined -0.4% m/m. -US weekly jobless claims dipped to 254k, pending home sales declined -2.4% m/m. -US personal income climbed 0.2% m/m and spending was flat m/m. Core PCE index was in line with consensus growth of 0.2% m/m. -US Chicago PMI climbed higher to 54.2.
-German retail sales declined -0.4% m/m , EU CPI(flash) climbed 0.4% y/y and unemployment rate ticked higher to 10.1%. -German Gfk consumer sentiment was reported at 10. -German Ifo survey expectations hit 6 year high of 104.5. -UK mortgage approvals was reported at 60k. -UK GDP (Final) climbed 0.7% q/q. -Japanese CPI declined -0.5% y/y, Housing starts climbed 2.5% y/y.Unemployment rate inched higher to 3.1% , household spending declined -4.6% y/y. -Japanese retail sales dropped -2.1% yoy in August.
Technicals: USD/INR: Spot closed below major moving averages. 20 day moving average(spot) is at 66.80. 50 day moving average(spot) is at 66.91. 200 day moving average is at 67.05. Daily MACD is in sell zone, implying important top at 67.15. Important support zone is at 66.32 and later at 66.10. Important resistance is at 67.14 and later at 67.25. EURO/USD: Trend is sideways. The pair is above major moving averages. Major resistance is at 1.1330 and later at 1.1425. Major support is at 1.11. Daily MACD is in buy zone, implying an important bottom at 1.11. Weekly MACD is in buy zone, implying important bottom at 1.09. GBP/USD: Trend is bearish in daily chart. Daily MACD is in sell zone, implying important top at 1.3445 and weekly MACD is in sell zone, implying important top at 1.5015. The pair is trading below below 200 day moving average. Important support is at 1.2775/1.25 Important resistance is at 1.35. USD/YEN: The pair is trading below 100 and 200 day major moving averages. Daily MACD is in sell zone, implying important top at 104.32. Major support is at 99.45. Important resistances are at 104.30/105.50. Strategy for USD/INR: Buyer’s credit be hedged from comfort angle. Imports be hedged.
Suggested Portfolio: 1) Buy USDINR on dips to 66.35/66.10. Hedging suggestion: Considering the volatility in the markets, suggest hedging of Currency exposures be done from costing/affordability angle.
Currency Map: Currency Pairs
WEEKLY CLOSE
PRIOR CLOSE
EURO/USD GBP/USD USD/JPY USD/INR
1.1224 1.2954 101.18 66.61
1.1224 1.2960 100.71 66.65
WEEK % change 0 -0.04 0.46 -0.06
Data and Events for upcoming week: US Data: ISM(mfrg and non mfrg), construction spending, factory orders, ADP employment report, trade balance Weekly jobless claims, and nonfarm payrolls EU data: PMI(mfrg and services), PPI, retail sales, German factory orders, UK: PMI(mfrg, services and construction), Industrial production Japan: Consumer confidence.
USD/INR CHART:
Research Team Goodwill Disclaimer: The data and information herein provided is believed to be reliable, but Goodwill Commodities does not warrant for its accuracy or completeness. Goodwill Commodities or any of its employees are not liable for any action taken by any party based on the above information. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Special note : Short term trading on the basis of technical is a high risk and skill oriented venture and may result in huge losses also. Traders doing so are doing at their own risk. We are not responsible for any damages. Note : The material is being provided to you for educational purposes only. (For more details please visit @ www.gwcindia.in/disclaimer ( Disclaimer & Privacy Policy )
