Currency Research Desk - Karvy Commodities · 2012-07-28 · Currency Research Desk Mail Us at...

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1

Currency weekly

July 28, 2012

Currency Research Desk

Global economic review

Economic performance Past week saw a mixed reaction through the week, which left only the US

stocks in the green. The European and Asian despite recovering on the

last two days of the week after ECB President Mario Draghi the bank was

ready to do whatever was necessary, within its mandate, to save the

euro. The European and Asian stocks ended with losses anywhere

between 0.5-2% for the week. But on the currencies front the statements

went a long way to help the major currencies gain against the greenback.

Euro recovered from three year lows to close at almost weekly highs. It

closed above 1.23/$ mark. On the domestic front the rupee ended flat on

a weekly basis. The gains were restricted by the weaker equities and

some month end buying by importers. The domestic index Nifty ended

with a loss of more than two percent on a weekly basis.

Major events

Major World Equities end lower

Major currencies end lower against the greenback

Indian Rupee closes flat

Dollar Index

Currency S2 S1 Close R1 R2 Recommendation

Dollar Index 81.70 82.50 82.70 83.00 83.90

Sell at 82.70-82.80 TP 81.70 SL 83.20

TECHNICAL SNAPSHOT Last week Dollar index declined

drastically in the later session of the

week and closed on negative note.

Index opened at 86.68 and hit a high of

84.10 and thereafter started declining

and tested a low of 82.34 and finally

closed at 82.70 down --% W/W. On the

charts Index is forming a “Rising wedge

pattern” on and is currently witnessing

supports of around 82.70 of 61.8%

Fibonacci retracement level for range

(72.69-82.70). RSI-14 is currently

trading at 0.59 and is slightly tending

towards downside. For this week we

expect Index would break the support

of Rising wedge pattern and may test

18 period EMA support of 87.60. For

this week we recommend to sell and

supports are witnessing at 82.70 then

81.70 and resistances are at 83.00 then

83.90.

CROSS LAST 1 week ago % Change

EURUSD 1.2322 1.2157 1.36

GBPUSD 1.5748 1.5623 0.80

USDJPY 78.4600 78.4900 -0.04

USDCAD 1.0033 1.0125 -0.91

USDCHF 0.9749 0.9880 -1.33

USDSEK 6.8665 6.9426 -1.10

DOLLAR INDEX 82.7090 83.4780 -0.92

INDICES LAST 1 week ago % Change

NIFTY 5099.85 5205.10 -2.02

SENSEX 16839.19 17158.44 -1.86

NASDAQ 2958.09 2925.30 1.12

DOW JONES INDUSTRIAL 13075.66 12822.57 1.97

SHANGHAI COMPOSITE 2128.77 2168.64 -1.84

NIKKIE 225 8566.64 8669.87 -1.19

HANGSENG 19274.96 19640.80 -1.86

FTSE Index 5627.21 5651.77 -0.43


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Currency Insight

USD/INR

Currency Contract S2 S1 Close R1 R2 Recommendation

USDINR MCX-SX Aug-12 54.697 55.148 55.6000 56.423 57.247 Sell at 55.50-55 TP 55.00 then 54.70 SL above 55.90

USDINR NSE Aug-12 54.708 55.168 55.6275 56.443 57.258 Sell at 55.50-55.55 TP 55.00 then 54.70 SL above 55.90

The Week Ahead

Rupee to remain volatile

European and Domestic equities to drive rupee

Strong Dollar demand to continue in next week

Fundamental Review

The rupee remained volatile in the last week with it showing losses and gains during the week. But in the end the rupee closed exactly where it started the week. Towards the end of the week we saw gains in the Euro helped rupee recover its losses but however the gains for the week were restricted as higher domestic demand for dollar kept a check on it. Furthermore the domestic equities also ended lower which further put some pressure on the rupee. The rupee ended the week at 55.32, with a weekly decline of 0.01%. The one-month offshore non-deliverable forward contracts were at 55.65, in the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 55.5775.

MCX-SX

NSE

Outlook

Last week saw the local unit end completely flat as mixed cues throughout the week kept it volatile. The coming week could be another volatile one as rupee looks for direction among domestic and global events. Domestically we have two major events for the next week. On Tuesday we have the RBI’s quarterly review where we could expect the central bank to hold its rates given the inflation remaining high. But if the central bank goes ahead with a 25bps cut in its rates then we could see the rupee rally in the next week as its parallels the gains in equities. After the RBI meet we have the Import and Export figures on Wednesday. We could the cost of imports coming in lower due to steep fall in crude oil prices. This could be slightly positive for the rupee. So domestically we could see the rupee remaining positive for the next week. From the international front the investors would be closely watching on to the Central banks and their moves next week. Both the US FED and ECB are stated to decide on their policy rates next week. We saw another week of slower economic growth from US and Euro which puts further pressure on both the economies to act on the deepening crisis. Though both the Central banks are expected to keep their rates unchanged this time the press meet after the meet and what steps they would take to stimulate the economy would have a far reaching effect on the markets. So for the coming week we could expect the currency markets to remain volatile. So, for the coming week, looking at the domestic and international events, we can expect the rupee to remain volatile with a positive bias from the domestic side.


3

Currency Insight

TECHNICAL SNAPSHOT

Last week rupee traded both the

directions, after opening with a gap

up at 55.31 it surged and hit high of

56.43. In the later session it started

declining and finally closed flat at

55.33. The pair has formed a

Bearish Gartley Harmonic pattern

on daily chart, which is considered

as reversal pattern. Currently pair

trading near the crucial trendline

supports of 55.30 break and

sustain below this may test next

major support of 54.00 which is

38.2 percent retracement level for

range (48.60-57.32). For this week

we expect pair may witnesses

selling pressure in the initial days

of week and in the later session

some buying pressure can be

expected in the later session. For

this week we recommend to sell at

on break of 55.30 and supports are

witnessing at 54.80 then 54.40 and resistances are at 55.50 then 56.10.

Recommendation: Sell at 55.50-55.55 TP 55.00 then 54.70 SL above 55.90


4

Currency Insight

EUR/USD


EURUSD SPOT 1.2140 1.2250 1.2320 1.2400 1.2502 Buy at 1.2300 TP 1.2440 then 1.2600 SL

1.2200

EURINR – MCX-SX

Auf -12 67.048 67.697 68.3450 68.807 69.268 Buy at 67.90-68.00 TP 68.60 then 69.00 SL 67.50

EURINR – NSE Aug -12 67.250 67.798 68.3450 68.748 68.931 Buy at 67.90-68.00 TP 68.60 then 69.00 SL

67.50

The Week Ahead

Economic data to have a slight positive impact

European equities to remain lower

ECB to keep rates unchanged

Fundamental Review

Last week saw the Euro recover all its losses and end the week with more the pone percent gains. The rally started in the last two

days of the week after ECB President Mario Draghi said the bank was ready to do whatever was necessary, within its mandate, to

save the euro. The euro and European stocks rallied in the last two days to cover its mid week losses. The euro ended at 1.2322,

higher by 1.36% W/W.

MCX-SX

Contract Open High Low Close % Change Volume % Change Open Interest % Change

Aug-12 67.9000 68.6200 67.5100 68.3450 0.54% 54741 1138.76% 38618 193.87%

Sep-12 68.1150 68.8200 68.0000 68.5700 0.29% 882 2161.54% 1074 952.94% NSE


Aug-12 67.7000 68.6025 67.6525 68.3450 0.43% 35638 594.70% 18986 76.80%

Sep-12 68.1475 68.8700 68.1475 68.6000 0.48% 2027 42.65% 1501 35.14% Outlook

After hitting fresh three yearly lows last week, the euro recovered to close with smart gains of over one percent after statements by

ECB’s president over the bank’s commitment to reviving the Euro. In the coming week apart from the economic reading the investors

have geared up for the ECB policy on Thursday. After the comments by ECB president in the past week the investors will look at the

central bank delivering further stimulus in the coming policy meet. On the rate front the ECB is expected to keep its rates unchanged

at 0.75%. So we could see the Euro remain positive ahead of the policy, but a failure to deliver on its commitments we could see a

backdrop by the markets and could see the Euro tumble. Apart from the policy meet on the economic front, German Retail sales are

expected to come in with a better reading for the second consecutive month with the latest figures expected to come in at 0.50%. But

the same cannot be said about the Euro zone retail sales which could see a figure of 0.00% from a prior of 0.60%. The PMi numbers

are expected to come in slightly higher which could support the Euro during the week. So in the coming week we can see the Euro

remain in a positive range for the first half of the week with the short term trend being decided after the ECB policy meet on

Thursday.

Economic data for week ahead

Date Time Region Event Survey Prior

08/01/2012 13:25 GE PMI Manufacturing Jul F 43.3 43.3


5

Currency Insight

08/01/2012 13:30 EC PMI Manufacturing Jul F 44.1 44.1

08/02/2012 14:30 EC Euro-Zone PPI (MoM) Jun -0.40% -0.50%

08/02/2012 17:15 EC ECB Announces Interest Rates 2-Aug 0.75% 0.75%

08/03/2012 13:25 GE PMI Services Jul F 49.7 49.7

08/03/2012 13:30 EC PMI Composite Jul F 46.4 46.4

Technical snapshot

After a continuous fall in recent

weeks, a sudden bounce has

been experienced in Euro, in the

mid of the week and finally closed

at 1.2320 up 1.37%. On the charts

we can notice pair is trading within

a “Falling Wedge pattern” and

resistance is coming at 1.2440,

break and sustain above Falling

wedged pattern will confirm a

trend reversal in the pair for short

term. RSI-14 momentum indicator

is also showing slight potential in

the pair by moving higher from

0.30 to 0.39. Although the overall

trend is still looking bearish, we

expect some pull back be seen in

the short term. For the week if the

pair manages to sustain above

trendline resistance of the Falling

wedge pattern, then we may see

pair testing the highs of 1.2700 in

coming days. For this we

recommend to buy and for this week supports witnessing at 1.2188 then 1.2080 and resistance are at 1.2570 then 1.2700.

.


6

Currency Insight

GBP/USD


GBPINR MCX-SX Aug -12 86.210 86.760 87.3100 87.865 88.420 Range 86.50-87.80

GBPINR NSE Aug -12 86.060 86.703 87.3450 88.090 88.835 Range 86.50-87.80

GBPUSD SPOT 1.5570 1.5660 1.5746 1.5790 1.5900 Buy above 1.5792 TP 1.5900 SL

1.5670.

Fundamental Review

The pound saw a slight gain in the last week following the rally in the other riskier assets. Equities and slightly better economic data supported the gains in the pound. The gain was however, limited as demand for riskier assets remained lower towards the end of the week. The Pound ended higher by 0.80% to close at 1.5748 MCX-SX


Aug-12 87.1000 87.8700 86.7650 87.3100 0.18% 37258 913.27% 47520 264.75%

Sep-12 73.9375 88.1800 87.1500 87.6500 1.58% 689 149.65% 924 -1.28%

NSE


Aug-12 87.2500 88.1925 86.8050 87.3450 0.20% 23316 309.48% 14616 200.18%

Sep-12 87.2500 88.0000 87.0025 87.6275 0.17% 1596 205.16% 782 127.99%

Oct-12 87.7500 88.1225 87.4000 87.6675 0.08% 509 -25.48% 386 -0.52%



08/02/2012 16:30 UK BOE ANNOUNCES RATES 2-Aug 0.50% 0.50%

08/03/2012 14:00 UK PMI Services Jul 51.6 51.3

Outlook

Last week saw the pound gains for a second consecutive week amidst a gain for riskier assets. For the coming week we could see the

pound follow a broader trend and rise in the wake of its larger counterpart the Euro. With the sentiments improving and investors pinning

hopes that the Euro crisis could ease with efforts of the ECB. From its own economy we have the Bank of England’s August meeting on

Thursday. Although the BOE is expected to keep the rates unchanged and a lid on the bond purchase programme, the major moves

would be seen in way ECB treats its policy action. Apart from the BOE’s meet we have the PMI numbers which could be slightly positive

and could surprise the pound as well. So we could expect the pound to remain in a slight positive bias for the coming week


7

Currency Insight

Technical snapshot

It was third consecutive week for

the Pound to trade higher and

close on positive note. Last week

pair has surged by 0.82% W/W

and finally closed at 1.5746.

Currently Pound is witnessing stiff

resistance around 1.580 of 50

percent Fibonacci retracement

level for range (1.6310-1.2651).

This week, if the pair manages to

breach resistance of 1.5800 then

it may test next resistance level of

1.5910 which is 61.8% retracement

level for the same range.

Momentum indicator RSI-14 is

hovering at 0.50 and is showing

potential towards upside. If the pair

once again fails to breach the

resistance of 1.5800 then we

expect it to trading a range

(1.5750-1.5580). For this week we

recommend to buy on break of

1.5800 for the targets of 1.5820

then 1.5900. For this week

supports are at 1.5660 then 1.5580 then resistance are evident at 1.5800 then 1.5900.


8

Currency Insight

USD/JPY


JPYINR MCX-SX Aug-12 69.783 70.447 71.1100 72.137 73.163 Sell at 71.20-71.30 TP 70.35 then 69.85 SL

71.80

JPYINR – NSE Aug-12 69.825 70.463 71.1000 72.115 73.130 Sell at 71.20-71.30 TP 70.35 then 69.85 SL

71.80

USD/JPY SPOT 77.30 77.98 78.41 79.00 79.58 Range 77.90-79.50

Fundamental Review

The Japanese yen ended almost flat after the greenback lost its sheen towards the end of the week. The hopes of further monetary easing by US FED helped the Yen gain slightly against the greenback. The yen closed at 76.46, a weekly gain of 0.04%.

MCXSX


Aug-12 71.0775 72.5000 70.8100 71.1100 0.64% 46517 2805.50% 32060 389.39%

Sep-12 72.6800 71.0400 71.3000 0.23% 359 17850.00% 181 1545.45%

NSE


Aug-12 71.4500 72.4925 70.8400 71.1000 0.57% 23130 295.79% 9423 249.26%

Sep-12 71.8000 72.5600 71.2200 71.2800 0.67% 192 -31.43% 217 143.82%

Oct-12 72.0025 72.5000 71.4000 71.5000 0.99% 21 2000.00% 8 800.00%



07/30/2012 05:20 JN Industrial Production (MoM) Jun P 1.50% -3.40%

07/30/2012 09:30 JN Vehicle Production (YoY) Jun -- 59.50%

Outlook Last week the Yen remained in a positive trend after depreciating in the beginning of the week. .The demand for the safe haven currency

remained slightly lower as risk aversion improved. In the coming week we expect the economic data in the form of Industrial production

numbers to come in better signaling positive bias for the currency. The Japanese equities are also expected to improve in the coming

week which could further support the Yen. So for the coming week we expect the Yen to stay in a range as domestically the economic

data is expected to come in higher which would support the currency. But at time of risk aversion Yen is expected to find some flight to

safety. Given the fact we have so much lined up in the next week we could expect the Yen to remain in a broad range for the coming

week


9

Currency Insight

Technical Snapshot

After few weeks of continuous

downward rally last week Yen

managed to restrict its fall and closed

marginally down by -0.05% W/W

forming a DOJI candle stick on

weekly chart. On the chart a Head

and Shoulder pattern formation can

be noticed on with a slanting neckline.

The neckline support is coming

around 77.90 and in the last week it

has rebounded from the same levels.

Sustained closed below 77.90 will test

the further lower levels in the coming

period. For this week 77.90 level will

remain as crucial support and as long

as pair sustains above this a pullback

can be expected. Rsi-14 Momentum

indicator is showing slight positive

divergence in the pair. For the week

expect a minor pull back can be

noticed in the initial days of the week

in the later of the week if the pair

breaches the support of 78.00 then we may see pair declining further. For this week supports are witnessing at 77.00 then 76.60 and

resistance are at 79.00 then 79.90.

Major economic events for the week


28-31 JUL CH Leading Index Jun -- 99.93

07/30/2012 05:20 JN Industrial Production (MoM) Jun P 1.50% -3.40%

07/30/2012 09:30 JN Vehicle Production (YoY) Jun -- 59.50%

07/30/2012 14:30 EC Euro-Zone Consumer Confidence Jul F -21.6 -21.6

07/30/2012 14:30 EC Euro-Zone Economic Confidence Jul 88.9 89.9

07/30/2012 14:30 EC Euro-Zone Indust. Confidence Jul -14 -12.7

07/30/2012 14:30 EC Euro-zone Services Confidence Jul -8 -7.4

07/30/2012 20:00 US Dallas Fed Manf. Activity Jul 2 5.8

07/31/2012 11:30 GE Retail Sales (MoM) Jun 0.50% -0.30%

07/31/2012 13:25 GE Unemployment Rate (s.a) Jul 6.80% 6.80%

07/31/2012 14:30 EC Euro-Zone Unemployment Rate Jun 11.20% 11.10%


10

Currency Insight

07/31/2012 18:00 US Personal Income Jun 0.40% 0.20%

07/31/2012 18:00 US Personal Spending Jun 0.10% 0.00%

07/31/2012 19:15 US Chicago Purchasing Manager Jul 52.4 52.9

07/31/2012 19:30 US Consumer Confidence Jul 61.4 62

08/01/2012 06:30 CH Manufacturing PMI Jul 50.4 50.2

08/01/2012 08:00 CH HSBC Manufacturing PMI Jul -- 48.2

08/01/2012 13:25 GE PMI Manufacturing Jul F 43.3 43.3

08/01/2012 13:30 EC PMI Manufacturing Jul F 44.1 44.1

08/01/2012 14:00 UK PMI Manufacturing Jul 48.4 48.6

Prepared by:-

Aurobinda Prasad ([email protected]) – Research Head

Vikrant Sharma ([email protected]) – Fundamental Analyst

Harish J ([email protected]) - Technical Analyst

Disclaimer

The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information contained herein is based on our analysis

and up on sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal

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Currency Research Desk - Karvy Commodities · 2012-07-28 · Currency Research Desk Mail Us at...

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Transcript of Currency Research Desk - Karvy Commodities · 2012-07-28 · Currency Research Desk Mail Us at...