Currency Report-Weekly Monday 2nd July 2018

Transcription

1 Currency Report-Weekly Monday 2nd July 2018 Global Economic Review Indian Rupee recorded its All Time low at amid sharp surge in Crude oil prices to three and half year high. Trump is said to tell advisors he seeks to withdraw U.S from WTO, terming it has made more loss than gains ECBs Draghi said EU Trade Tensions have a large trade impact and warned Euro leaders over lower confidence. Brent Crude reached near $80 once again in 2018 amid sharp fall in U.S crude inventories and supply concerns from OPEC members. EU28 Leaders have agreed on European counsels conclusions including migration lifted Euro. Foreign investors have withdrawn more than INR 46,000 Crore in 2018 till date from domestic equity and debt markets, highest in a decade. Growth in Chinas manufacturing sector slowed in June, as escalating trade tensions with U.S fuel concerns about slowdown in the economy. U.S. intelligence agencies believe North Korea has increased production of fuel for nuclear weapons at multiple secret sites in recent months and may try to hide these while seeking concessions in nuclear talks with the U.S. INDICES Last Price Previous Week % CHANGE NASDAQ % DOW JONES % NIKKEI % HANGSENG % CAC % DAX % FTSE % Currencies Last Price 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 Sharp bounce back in Euro late during the week has erased all the DXY gains which it has accumulated early during the week. Euro bounced back amid positive outcomes from the EU summit held on 28th 29th June. Dollar index remained susceptive to the news on Global trade war tensions before going down on Friday. The Green back has started to gain as investors digested trump comments on China being barred from investing in U.S tech Companies but the relief was short lived after White house Larry kudlow said Trump was not retreating on China raised speculations on among investors opened the doors for more speculation. U.S reporting softer than expected GDP data after weaker durable goods & Consumer confidence numbers also added weakness to the DXY against basket of currencies. The dollar index is expected to remain weaker early during the week but is also expected to bounce back finding its support at 94 as event driven volatility cools off in Euro and GBP which would remain weaker owing to softer growth in Q2. The DXY Daily charts indicate the upside move in the index was halted in the last session where it wiped off all the gains made throughout the week to move down again and settle below the mark was the level the DXY had breached a week earlier only to rise higher testing the mark. The index now is again headed towards this crucial support of which it is expected to sustain and move up again continuing its primary trend in the upside and move as high as again in the coming week if not sustained and breached in the downside firther below 93.40; the index will turn completely bearsih putting the index under pressure breaching the dense ichimoku cloud. The next levels in this case would be for the index. The chart also shows that the prices have reached the 20-EMA and a minor recovery in the upside from the current levels could be seen. Range Sideways Buy DXY SL TGT S2 S1 Pivot R1 R2 R

3 Rupee Outlook The Indian Rupee recorded its all-time low on 28 June at making it as worst performing currency in Asia at least for Global trade tensions coupled with surge in crude oil prices to three and half year high added losses. Growing concerns over widening current account deficit to 2.5% of GDP at times when global central banks starting to trim down balance sheets has made rupee depreciate almost 8% in Foreign capital which failed to fill the deficit gap with foreign investors withdrawing more than INR 46,000 Crore in 2018 till date from domestic equity and debt markets, highest in a decade. Creeping up U.S treasury yields and FED hinting for an additional couple of rate hikes in 2018 coupled with ongoing global protectionism policies, fresh capital inflow into Indian markets in the near term looks minimal. Although data with RBI suggests that dollar reserves are sufficient for at least another 10 month import payments, intrusive RBI intervention also not expected under current liquidity draining conditions. With no change in input variables for Rupee depreciation, Indian unit is expected to be sensitive to the above factors and continue to remain weaker but with limited downside. For the week should act as a crucial support for the rupee, if broken we would see higher levels. On the flip if USDINR fails to break we might witness a consolidation between to range. The USDINR Daily charts suggest that the pair after making a lifetime high of and dropped down immediately in the last couple of sessions was the 10 paise zone which the pair was unable to breach in the week earlier. But this week, the pair breached this zone and moved further higher to breach the 69 big figure. A correction after such major moves is a general phenomenon and same happened to the pair, taking the pair down again to and settle for the week. The pair should now find supports at odd levels and move up to continue its bull run this week too should act as a major support level for the week. The Bollinger-RSI combination also suggests a little of correction from the current levels. Range (Spot) Sideways-Bullish Buy USDINR SL TGT (SPOT) S2 S1 Pivot R1 R2 R

4 Euro Outlook EU28 leaders agreeing on conclusion including the migration policies triggered a long rally in EURO. European leader which were seen diverged on a range of issues agreeing to the common issues gained the investors sentiment. Newly elected Italian Prime minister who threatened to scrape the migration policies have agreed to policies after rest EU peers meet its decision over trade and security. Positive outcome from EU summit resemble the unity among EU countries and lower than expected U.S GDP numbers added gains to the Euro. Economy not rebounding in Q2 and Strong dollar continue to weigh down the Euro, but a strong support at cannot be ruled out. On the flip side a dollar should act as a strong resistance as investors are expected to focus on economic numbers after the event driven bullishness curbs at a strong resistance. Softness in U.S Pay roll data scheduled to be released later during the week is expected to give additional strength to the EURO in the coming week. The EURUSD Daily charts indicate that the pair has been forming a base near the 50% Fibonacci support levels of but has been unable to move up above the 38.2% Fibo level of has acted as a strong resistance in the pair till now. It is only when the pair moves above will it turn bullish. Untill then the pair shall trade under pressure. The dense bearish ichimoku cloud also suggests the same but the bearish Parabolic SAR has penetrated the ichimoku cloud from upside indicating chances of an end to the downside in the pair. So, if breached in the upside will attract more buyers in the pair taking it further in the upside to rise above the cloud and test the next Fibonacci level of Sideways Buy EURUSD SL TGT Buy EURINR SL TGT S2 (SPOT) S1 Pivot R Range R2 R

5 British Pound Outlook U.K economy expanding by 0.2% (QoQ) Vs 0.1% expected coupled with no big negative news on Brexit from EU summit added gains to the GBP which has taken a support at a dollar. Better than expected GDP numbers added confidence among the investors over the U.K economy after showed a mild recovery during the early Q2. Latest GDP numbers comes in also supports the bullish stance of Bank of England which showed confidence over U.K economy rebounding in Q2 pointing out at strong employment numbers. Better than expected GDP and employment numbers failed to drive the country s inflation has differed the chances of rate hike by BOE. The British pound would continue to gain if supported by the economic data which would increase the likelihood of at least one rate hike by BOE in For the week we expect the GBP to continue to remain higher but with a limited upside which might be restricted at a dollar. Untill last week the Pound behaved very much similar to the Euro against the Dollar, but this week the GBP was hit harder against the USD pushing GBPUSD down below the 50% Fibonacci support level of though it settled for the week at We should watch the further move in the pair if it drops down again or recovers to rise up towards levels. For now, the pair is in its bearish trend but is oversold and might trade in huge swings this week trying to consolidate around the level with as an interim support which if breached a further dip towards could be witnessed in the pair. This week one can initiate longs with stops placed below Range Sideways Buy GBPUSD SL TGT Buy GBPINR SL TGT S2 S1 Pivot R1 R2 R3 (SPOT)

6 Japanese Yen Outlook Japanese Yen moved lower for four of the five trading sessions as U.S 10 year yields have taken a support at 2.82% coupled with the strong dollar. Escalating trade war tensions also did not help the yen to recover. Widening yield differential between U.S and Japanese securities is keeping the Yen under pressure. Global protectionism policies which would dampen the Japanese economy further is also adding weakness to the yen. Surprised Bank of Japan decisions to trim down the bond purchase program also failed to support the Japanese yen as the investors continued to focus on Japanese inflation failing to reach the BOJ targeted levels. While inflation not expected to move higher in the near term we expect the Yen to remain weaker with a strong support at 111 a dollar, if broken would see during the week under consideration. As expected in the previous weekly report the USDJPY pair has taken a strong support at with 23.6% Fibonacci level and base of upward moving trend line. Middle Bollinger line placed at the same levels on the daily chart also gave the support to the pair. USDJPY pair currently trading at with MACD and RSI moving in the positive territory, the pair is likely to retest its previous resistance placed at , if broken the pair might see where the indicators would turn over bought. For the week traders can adopt a buy on dips strategy until it remains above a dollar as the pair would see mild profit booking after moving in green for four consecutive sessions, with an expectation of by the end of the week where we would witness an increase in supply. Sideways (SPOT) Range Buy USDJPY SL TGT Sell JPYINR SL TGT S2 S1 Pivot R1 R2 R

7 Currency USDINR EURINR GBPINR JPYINR July Import Strategy Part hedging done at & Part Hedging to be done at Spot Part Hedging to be done at Spot Part Hedging to be done at Spot. Hedging Strategies Economic Data for the Week July Exports Strategy Part Hedging done at & Spot. Part Hedging to be done at Spot. Next at Part Hedging to be done at & Spot. Part Hedging to be done at Spot Date Time Currency Data Forecast Previous :00 PM GBP Manufacturing PMI :30 PM USD ISM Manufacturing PMI :00 PM GBP Construction PMI :00 PM GBP Services PMI :30 PM GBP BOE Gov Carney Speaks 04:45 PM EUR German Buba President Weidmann Speaks 05:45 PM USD ADP Non-Farm Employment Change 190K 178K 06:00 PM USD Unemployment Claims 231K 227K 07:30 PM USD ISM Non-Manufacturing PMI :30 PM USD Crude Oil Inventories -9.9M 11:30 PM USD FOMC Meeting Minutes :00 PM GBP Halifax HPI m/m 0.4% 1.5% 06:00 PM USD Average Hourly Earnings m/m 0.3% 0.3% USD Non-Farm Employment Change 200K 223K USD Unemployment Rate 3.8% 3.8% Head Office Karvy Millennium,Plot No 31, Financial District, Gachibowli, Hyderabad T: / 6635 Corporate Office 131, Andheri Industrial Estate, Off Veera Desai Road, Andheri (W), Mumbai T: , Mob No Disclaimer: The information and analysis contained in this document come from sources believed to be reliable and our own internal research; however, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of this information. Nothing contained in this publication shall constitute an offer to sell/purchase or an invitation/ solicitation to do so for any currency, security, commodity or equity. Karvy Forex & Currencies Pvt. Ltd. accepts no liability whatsoever for any loss, howsoever arising, from any use of this document, its contents or otherwise arising in connection therewith.no part of this document can be circulated or reproduced in any form without prior approval of Karvy Forex & Currencies Pvt. Ltd.