Forex Daily Market Commentary: October 15, 2013 The Indian rupee opened at 61.25 levels after closing at 61.54 levels yesterday. The intraday range is seen between 60.90 - 61.55 levels. The Indian rupee weakened yesterday after official data showed higher-than-expected inflation for the month of September, increasing the markets expectation of another rate hike. Indias wholesale price index (WPI) rose by 6.46 percent in September versus a year earlier, well above expectations of a 6.0 percent advance and above the 6.1 percent seen in August. The high inflation is making it more likely that the Reserve Bank of India will raise interest rates by 25 basis points on October 29. Market investors expect a rise in interest rates by another 25 basis points, even after the data showing economic growth for the June quarter hit a 4-year low. The consumer prices data, which was released after market hours, rose to 9.84 percent year-on-year in September, the fastest pace in three months. India is struggling to lift its economic growth rate, which has hit a decade-low figure but Raghuram Rajan has clearly signalled that he will focus on price stability, which he sees as a necessary condition for raising the rate of growth. Even though the measures adopted by the RBI governor are seen to help the market, we cannot ignore the basic fundamentals that are still away from showing any signs of improvement. The weaker factory data along with the sticky inflation numbers would severely impact the growth. Still we note, several of the problems are in place, but they need to be taken care in the way that the QE tapering has just been postponed. The Asian markets are trading higher as Senate leaders have said they are optimistic and they will forge a deal this week to reopen the US government and avoid a breach of the debt limit. The possible deal could face some procedural delays in the Senate and an uncertain path in the Republican-controlled House of Representatives, where Speaker, John Boehner would have to decide whether to allow a vote or make changes. The US government would run out of borrowing authority in two days and would start missing debt payments sometime between October 22 and October 31. The US 10-year treasury yield is trading at 2.71%. On the other hand, the Indian 10-year bond yield closed at 8.57% than the previous close of 8.49%. Outlook: The Indian rupee was seen breaking the key support of 61.40 levels, but yesterday it closed above the same. As mentioned earlier consecutive closing below this levels would only then lead to further gains. Exporters, for their near-term open exposures, can pre-utilize the long forwards and maintain their hedge ratios. Importers are advised keep a stop loss of 61.60 levels to buy for November and December. Short Term: If the rupee manages to close below 61.40 levels for two more days, then we can see a move towards 60.00- 60.20 levels. Medium Term: USDINR: BULLISH EUR/USD: The Euro is trading at 1.3556 levels versus the US dollar. The Euro is seen gaining against the US dollar on the back of stronger data and a desire to sell the greenback. Industrial production in the Euro zone grew 1.0% in the month of August, erasing the decline of the previous month. The German ZEW survey is scheduled for release today and given the risk that the US fiscal debt crisis poses for the markets, we would not be surprised if investor confidence deteriorates in the month of October. The ECOFIN meetings are also scheduled today. The support is seen at 1.3480 levels, while resistance is seen at 1.3720 levels. Target - 1.36, short term: Bullish. USD/JPY: The yen is trading at 98.49 levels versus the US dollar. The yen is trading lower against the US dollar despite the absence of any major Japanese data releases. The lack of market moving data means that yen crosses will take their cues from the risk appetite and the US treasuries. The Bank of Japan Governor, Kuroda will be speaking at the end of the week; and it is expected that the Central bank head will express confidence in the current level of monetary policy. The near-term support is seen at 94.33 levels and resistance is at 102.50 levels. Target - 103, medium term: Bullish. GBP/USD: The British pound is trading at 1.5981 levels versus the US dollar. The pound strengthened from near a four-week low versus the dollar as the reports this week are likely to add to signs that Britain’s growth is gaining momentum, boosting demand for the currency. The CPI will be released tomorrow and the economists are anticipating the CPI growth to slow, and for the annualized rate to drop to 2.6% from 2.7%. While consumer prices are running above the Central banks 2% target, the prices are slowly dropping from the 2.9% rate last seen in June. The near-term support is seen at 1.5870 and resistance is at 1.6310. Target - 1.6280, short term: Bullish. AUD/USD: The Australian dollar is currently trading at 0.9520 levels versus the US dollar. The AUD is trading above its three-month high versus the US dollar. The Australian dollar shrugged off the weak Chinese data and moved higher. The Reserve Bank of Australia is scheduled to release the minutes from its last monetary policy meeting tonight. When they last met, their less dovish tone drove the Australian dollar sharply higher. At the time, the RBA left the interest rates unchanged and noted the improvement in business and consumer confidence. The near-term support is seen at 0.8800 levels, while the immediate resistance is at 0.9576 levels. Target: 0.90, medium term outlook: Bearish. Gold: Gold is trading at US$ 1273 levels. Gold prices are trading lower after an order to offload around 5,000 December futures contracts hit the market, which was then put into a brief trading halt by Comex. The US government shutdown and the looming debt ceiling deadline have failed to support gold in recent weeks. This is in contrast to 2011 when in similar circumstances the precious metal rose above US$1,800. The near-term support is seen at 1230 and resistance is at 1330 levels. Target: 1220, medium term: Bearish. Crude Oil: Crude oil is trading at US$ 102.33 levels. Crude oil is trading on a mixed note as weak Chinese export data and growing concerns over US debt ceiling negotiations weighed on the appetite for growth-linked assets. The recent data showed that China’s trade surplus narrowed to USD15.2 billion last month from a surplus of USD28.6 billion in August, compared to estimates for a surplus of USD27.7 billion. The near-term support is at 100.60 and resistance is at 105 levels. Target: 106, medium term: Bullish. Dollar Index: The US dollar is trading at 80.33 levels. The US dollar is trading flat with a bearish bias. Another day has passed without the Congress having reached an agreement to raise the debt ceiling or fund the government for a few weeks and yet losses in the dollar are limited. While the greenback traded lower against most of the major currencies, the losses were small as the dollar recovered from a steeper slide at the start of the North American session. A number of Central bank Presidents are also scheduled to speak this week and we will be listening closely to see if the government shutdown and the fiscal uncertainty have made them more reluctant to taper asset purchases this year. The support is seen at 79.20 levels and resistance is at 83.00 levels. Target: 81-84, medium term outlook: Bullish.
Posted on: Tue, 15 Oct 2013 06:03:25 +0000
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