Currencies Weekly Report

Transcription

1 Currencies Weekly Report Monday 29 May 2017 Global Economic Review & Outlook Major oil producers agreed to extend output cuts for an additional nine months at an OPEC meeting in Vienna. The production cuts of 1.8 million barrels a day, first agreed on in November last year, will now extend to March The OPEC-led output cuts are targeted at rebalancing the global overhang in the oil markets which saw oil prices fall by more than half in recent years. Oil prices fell by almost 5 percent in the last session following the news as some investors had been hoping for deeper production cuts. US crude had traded above the USD 50 mark for most of the week in anticipation of the OPEC meeting. Political developments in the US could also potentially rattle markets continuing the political turmoil in Washington also kept investors cautious as U.S. President Donald Trump, returned to the White House after a nineday trip to the Middle East and Europe. It was reported by NBC that Jared Kushner, the son-in-law and senior adviser of US President Donald Trump, was now under FBI scrutiny in its Russia probe. North Korea fired what appeared to be a short-range ballistic missile which landed in the sea off its east coast, South Korea's military said, the latest in a series of missile tests defying world pressure and threats of more sanctions. While the situation remains tense, the market has gotten used to missile launches, with broader volatility also declining, The latest weekend polls showed British Prime Minister Theresa May's lead over the opposition Labour Party has narrowed sharply since last week's terror attack in Manchester, suggesting she might not win the landslide predicted just a month ago. Four opinion polls published on Saturday showed that May's lead had contracted by a range of 2 to 6 percentage points, indicating the election could be much tighter than initially thought when she called the snap vote. The PBOC has fine-tuned the pricing mode in the last couple of years by taking reference to the yuandollar closing price and the yuan s value against a basket of currencies. Beijing says yuan policy is actually doing US a favour But the China Foreign Exchange Trade System said the mainland s foreign exchange market was susceptible to irrational expectations that could exaggerate one-sided sentiment. A counter-cyclical factor in the pricing model could help offset the herd effect and bring the yuan s central parity in line with economic fundamentals, it said. INDICES % CHANGE NASDAQ DOW JONES NIKKEI HANGSENG CAC DAX FTSE Currencies Last Price Last Price Previous Week Previous Week % CHANGE DXY EURUSD GBPUSD USDJPY RBI Reference Rate USDINR Forward Rates (Month End) MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY 1 Month 3 Month 6 Month 9 Month 12 Month USDINR Monday EURINR Tuesday GBPINR Wednesday JPYINR Thursday Friday

2 Dollar Index Outlook US dollar index closed for the week at compared to previous week s close of Trading range for the week was in between This week US dollar against the major basket has taken a rollercoaster ride with the investors remaining cautious about U.S. political uncertainty about Trump s election campaigns, where he was suspected to have links with Russia. Due to which market participants sold off US dollar expecting that the turmoil in Washington could delay President Trump's efforts to implement economic stimulus plans. FOMC meeting minutes from May 2-3 meeting has showed that most Fed officials saw tightening likely to be appropriate as soon as consumer spending rebounds, a few policymakers were worried that progress on inflation has slowed. They also said their balance-sheet plan would raise roll-off caps every 3 months as part of their process to unwind stimulus. But US dollar has witnessed selling across the board as the investors as investors are concerned about inflation view of the Fed officials. U.S. Q1 GDP was revised higher to a 1.2% growth rate versus the 0.7% pace in the Advance report. That's much better than expected, with most components bumped up. Consumption was nudged up to 0.6% from 0.3%. The 10.4% jump in business spending was revised to 11.9%, with residential spending at 13.8% from 13.7%, and non-residential spending at 11.4% from 9.4%. Government consumption was revised to -1.1% from -1.7%. Inventories subtracted $45.3 bln versus - $39.3 bln. Going forward US is shut on Monday 29th May for Memorial Day and there no major reports to be publish. Tuesday 30th May s calendar is packed with Personal spending figures for the month of April along with Core PCE Price Index numbers and CB Consumer Confidence, we also have FOMC Member Brainard scheduled to speak later in the day. Pending home sales data for the month of April, Chicago PMI for May, a speech from FOMC Member Kaplan and Williams along with Beige Book report are due for Wednesday 31st May. On Thursday 1st June we have ADP Nonfarm Employment Change, Initial Jobless Claims, Nonfarm Productivity, Manufacturing PMI, ISM Manufacturing Employment and PMI number for the month May due to be reported. Friday 2nd June, we have Average Hourly Earnings, Nonfarm Payrolls and Private Nonfarm Payrolls for the month of May, US Trade Balance, Unemployment Rate and a speech from FOMC Member Harker scheduled. The DXY Daily charts suggest that the Index continues to trade under pressure well below the 50% Fibonacci retracement levels. We have seen the index rise from levels last week to test and as the pair trades near the D EMA's there are chances it might bounce a little % levels. Sustenance at these levels, which is a rare scenario, might help the index rise upto levels this week. The index though is more likely to continue trading weak, well below the dense bearish Ichimoku cloud; dropping further down to and further. Weekly Bias Weekly Trading Strategy (SPOT) Weekly Range (SPOT) Bearish SELL DXY SL TGT S3 S2 S1 Pivot R1 R2 R3 Pivot Levels

3 Rupee Outlook Indian Rupee against US dollar has closed for the week at64.44 compared to previous week s close of Trading range for the week was There was no major economic data reported from Indian context in the previous week. Most of the movement happen in the pair was technical. As well as few other global factors have shaped the previous week s move. A couple of geopolitical incidents in Asia raised some eyebrows but not risk aversion after recent volatility subsided. Looking forward we have India s Q4 GDP numbers to be reported on Wednesday 31st May where the expectations are set 7.1%. Along with day markets would also focus on RBI policy on 7th June and FOMC meeting on 14th June. Coming to eco reports US NFP data is due to be reported later this week. As well as any update on Whitehouse turoil would add some further volatility. This is the daily chart of USDINR spot, during the last week the pair has been trading in the range of on the downside and on the upside, and could not able to close above the resistance of 65 levels, the pair made a bottom near 64 levels and bounce till 65 levels and not able to close above that signifies bears are aggressive at the said levels expect the same trend to continue during the week, so trader can utilize uptick to sell the pair. Weekly Bias Weekly Trading Strategy (SPOT) Weekly Range (SPOT) Bearish SELL USDINR SPOT SL TGT Pivot Levels S3 S2 S1 Pivot R1 R2 R3 (Futures) Exporters Strategy May Exports hedged at (Stop Levels) Importers Strategy May imports partially hedged at 64.85/90 and 64.20/25

4 Importers Strategy May imports partially hedged at 64.85/90 and 64.20/25 Euro Outlook EURO closed for the week at compared to the previous week s close of Trading range for the week was The euro had hit more than 6-month s high against US dollar after German Chancellor Angela Merkel said it was "too weak" because of the European Central Bank's ultra-low interest rates and money printing program. And Bundes Bank s President Weidmann who spoke in the previous week stressed on central bank's policy which doesn't hinge on political events, but price pressures. He admitted that at the current moment nobody doubts that an expansionary policy is appropriate, but added that there are different opinions on the necessary degree of expansion and the instruments used. In what sounded like a thinly veiled comments on reports that Merkel and Schaeuble want to see him as Draghi's successor Weidmann stressed that the central bank head should be selected on merit, not on nationality. ECB's Draghi in the previous weeks said that No reason to deviate from policy guidance, stressing that QE could have more negative consequences than negative interest rates. He also admitted that the macroeconomic climate is improving and the Eurozone is witnessing an increasingly solid recovery, but he also said underlying inflation pressures remain subdued. Apart from the Service PMI data s most of the economical report exceeded the expectations. Looking ahead we have, ECB s President Draghi scheduled to speak on Monday 29th May. Tuesday 30th May, we have ECB's Liikanen and Nowotny scheduled to speak along with German CPI numbers to be reported. German Retail Sales, German Unemployment Change and rate, Eurozone Core CPI numbers and Unemployment rate along with a speech from ECB's Coeure and Lautenschiaeger scheduled for Wednesday 31st May. Thursday 1st June s calendar is packed with Eurozone s and German Manufacturing PMI figures and a speech from ECB s Lautenschiaeger. This is the daily chart of EURUSD pair, during the week the pair traded in a broader range of on the down side and higher side and had a shooting star type of candle signifying a short term reversal after a strong run up, the pair broke out of 1.08 levels with a runaway gap and since then had a trending session on the upside, the pair had a inverted head and shoulder pattern and had strong momentum and now that momentum is over and the pair can consolidate with 21 dma at likely to act as a support so utilize dips to buy the pair. Weekly Bias Weekly Trading Strategy (SPOT) Weekly Range (SPOT) Bullish BUY EURUSD SL TGT BUY EURINR FUT TGT SL Pivot Levels S3 S2 S1 Pivot R1 R2 R3 (Futures) Exporters Strategy May exports hedged at Importers Strategy May imports partially booked at levels. Remaining stopped at/above 70.50

5 Importers Strategy May imports partially booked at levels. Remaining stopped at/above British Pound Outlook Pound closed for the week at compared to the previous week s close of Trading range for the week was Most of the moment is happed due to the raising UK political concerns as an opinion poll showing that the Labour Party narrowed the gap on the ruling Conservative Party ahead of upcoming elections, adding to political risks surrounding Brexit. Investors had been confident that Prime Minister Theresa May would secure a strong win in the election, strengthening her hand in Brexit negotiations and allowing her to ignore lawmakers pushing for a hard Brexit but the tough negotiations with the E.U. last week started with talk that the UK could walk away from Brexit negotiations if it is forced to pay its massive exit bill of as much as $100 Billion. At the same time, the EU refuses to back down from its hard negotiating stance, making the path forward difficult to see. Coming to economical data UK s Q1 GDP numbers were reported in the previous week and it was trimmed to 0.2% quarter on quarter and the latest CBI retails sector survey for May showing "tepid trading conditions" in the key sector in the face of eroding inflation-adjusted average household income. Coming into today, Coming to this week, UK is shut on Monday 29th May for Bank holiday. On Thursday 1st of June we have Nationwide HPI and Manufacturing PMI figures for the month of May due to be reported. And 2nd of June we have Construction PMI figures scheduled to be reported. Though we have major data scheduled to be reported this week the focus to remain on UK political news as getting close to snap elections on 8th of June. And any news about UK-EU negotiation on Brexit would add further volatility. In near term GBP/USD pair to remain under pressure and expect the pair to head towards levels. This is the daily chart of GBPUSD pair, during the week the pair traded in the range of and had a bearish candle during the week. After a previous week consolidation, the pair broke out of the pennant pattern above and trended on the upside during few weeks back, the pair tested the levels of and could not sustain above that now 1.27 is a strong support zone while resistance comes at 1.30 levels so likely to trade within the specified range. Weekly Bias Weekly Trading Strategy (SPOT) Weekly Range (SPOT) Bearish Sell GBPUSD TGT SL SELL GBPINR FUT TGT SL Pivot Levels S3 S2 S1 Pivot R1 R2 R4 (Futures) Exporters Strategy May exports partially booked at levels. Remaining stopped at Importers Strategy May imports partially hedged at levels. Remaining booked at (RBI Ref.on )

6 Importers Strategy May imports partially hedged at levels. Remaining booked at (RBI Ref.on ) Japanese Yen Outlook Japanese Yen closed for the week at compared to the previous week s close of Trading range for the week was Japanese Trade Balance fell short of expectations at 482 billion Yen against the forecasted 521 billion Yen. The YoY data for exports also fell below the previous levels of 12%, now at 7.5%. NIKKEI 225 is also trading on the higher side, up by 0.33% or 66.74points. Weaker economic data in regard to Yen and the strengthening of the Dollar in the market is pushing toward depreciative Yen. A couple of geopolitical incidents in Asia overnight raised some eyebrows but not risk aversion per se after recent volatility subsided. FOMC meeting minutes from May 2-3 meeting has showed that most Fed officials saw tightening likely to be appropriate as soon as consumer spending rebounds, a few policymakers were worried that progress on inflation has slowed. This resulted in US dollar sell-off across the board as investors were concerned about inflation view of the Fed officials. Looking ahead, this week Japanese Household Spending figures are scheduled to be published for the month of April where the expectations are set at 1.1%, along with that we also have Jobs/applications ratio and Retail Sales to be reported on Tuesday 30th May. Industrial Production for the month of April are scheduled to be published on 31st May And on Thursday 1st June we have Q1 Capital Spending year-on-year due to be reported. This is the dally chart of USDJPY pair, the pair was trading a range of and on the downside the pair had a doji kind of a candle on a weekly time frame near the supports of 111 levels near the 200DMA, after falling from levels in the previous week, strong supports comes at 108 on the downside while strong resistance comes at 114 levels and pair is likely to trade with the range for the coming months with some positive bias so traders can utilize dips to buy the pair. Weekly Bias Weekly Trading Strategy (SPOT) Weekly Range (SPOT) Sideways-Bearish BUY USDJPY TGT SL 110 SELL TGT SL Pivot Levels S3 S2 S1 Pivot R1 R2 R4 (Futures) Exporters Strategy May exports partially booked at and Importers Strategy May imports partially booked at and

7 Importers Strategy May imports partially booked at and Economic Data for the Week Date Time Currency Data Forecast Previous M3 Money Supply y/y 6:30pm EUR ECB President Draghi Speaks German Prelim CPI m/m 12:30pm EUR Spanish Flash CPI y/y 2.10% 2.60% 6:00pm USD Core PCE Price Index m/m 0.10% -0.10% USD Personal Spending m/m 0.40% 0.00% 7:30pm USD CB Consumer Confidence German Retail Sales m/m 2:00pm GBP Net Lending to Individuals m/m 4.5B 4.7B 2:30pm EUR CPI Flash Estimate y/y 1.50% 1.90% EUR Core CPI Flash Estimate y/y 1.00% 1.20% 5:30pm USD FOMC Member Kaplan Speaks 7:15pm USD Chicago PMI :30pm USD Pending Home Sales m/m 0.70% -0.80% Spanish Manufacturing PMI 2:00pm GBP Manufacturing PMI :45pm USD ADP Non-Farm Employment Change 181K 177K 6:00pm USD Unemployment Claims 239K 234K USD Revised Nonfarm Productivity q/q -0.60% -0.60% 7:30pm USD ISM Manufacturing PMI :30pm USD Crude Oil Inventories -4.4M Spanish Unemployment Change 2:00pm GBP Construction PMI :00pm USD Average Hourly Earnings m/m 0.20% 0.30% USD Non-Farm Employment Change 186K 211K USD Unemployment Rate 4.40% 4.40% USD Trade Balance -45.5B -43.7B :30pm EUR 5.20% 5.30% All Day EUR -0.10% 0.00% :30am EUR 0.40% 0.10% :45pm EUR :30pm EUR K K

8 Report prepared by: Siddhesh Ghare Deepak Agarwal Shashank Damaraju 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 information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentioned companies from time to time. Every employee of Karvy and its associated companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Stock Broking Ltd.

9

10

11

12

13

14