Currency Weekly A C o m p r e h e n s i v e R e p o r t

Transcription

1 Global economic review Economic performance: The last week we saw the European soverign feras coming back to haunt the markets. The Equity as well as the currency markets tumbled led by the European region. We saw the European markets loose anywhere between 3-5% on a weekly basis. The Euro lost about 4% in the same period. This effect was also seen on the Asian markets as the asian equities and currencies bore the brunt. Gold and The greenback remained CROSS LAST 1 week ago % Change major gainers for the week. The greenback was EURUSD further supported after President Obama GBPUSD unvieled a $447 billion plan for jobs creation. He also proposed tax cuts for small and businesses. The gains were limited after Bernake the Fedral chief didn t give any indications of a stimulas for USDJPY USDCAD USDCHF USDSEK the economy. The ECB and BOE kept the rates unchanged at 1.5 and 0.5% respectively. This added further pressure on the European currency. The asian currencies lost agains the USD. The Indian Rupee and the Korean Won being the lossers. The rupee lost by more than 1.5% on a weekly basis wheras the Korean Won lost by more than 1%. Major events: Weaker Economic data Hurts Equities and Commodities ECB and BOE keep rates unchanged Crude and Gold gain on weekly basis Dollar Index Currency S2 S1 Close R1 R2 Recommendation Dollar Index TECHNICAL SNAPSHOT: The last two weeks advancement was highly erratic keeping the momentum higher. The DXY settled at up by 4.89 per cent in last two weeks. Precisely, another week on the higher side can be expected. However, correction can be expected as the momentary gains were erratic. The lower levels support could be seen at levels and then levels. This should be quite far to think hence intermediate supports could be seen at then levels. Likewise, on the higher side the resistances could be seen at levels. The conventional MACD shows positive trend for the index. Moreover, the gains have been so high that market needs to correct a while in the daily chart to make a fresh move. Therefore, we believe to take long positions on lower levels. Recommendation: Buy TGT: 78 SL below CROSS LAST 1 week ago % Change USDINR EUROINR GBPINR JPY (100) Futures MYR SGD DOLLAR INDEX Buy TGT: 78 SL September 12,

2 USD/INR Currency Contract S2 S1 Close R1 R2 Recommendation USDINR Buy TP Sep SL USDINR Sep The Week Ahead: Rupee to remain negative for the coming week Weaker Equity markets to weaken rupee Crude Oil Movement to impact rupee s move in coming week Buy TP SL Fundamental Review The Rupee lost for the week ended September 9 th as importer demand along with weaker equities. The rupee was further hurt by a very weak Euro and an overall stronger dollar index. The Euro fell by more than 3.5% as the greek fears hit the markets again. The rupee hit a 9 month low on these fears. The Nifty closed flat to slightly positive with a weekly gain of 0.39%. this was not enough to deter the rupee from hitting fresh monthly lows. The Rupee ended the week with a loss of 1.64 percent to close at The one-month onshore forward premium was at points from 8.25 the week before; the three-month was at 44 points from and the one-year stood at 131 points from 126. The one-month offshore non-deliverable forward contracts were quoted at 46.78, weaker than the onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the, and the United Stock Exchange were all at The total volume was at $3.44 billion. Sep % % % Oct % % % Nov % % % Sep % % % Oct % % % Nov % % % Outlook In the past week we saw the rupee end with loss of more than 1% on the back of a broad base buying in dollars by domestic oil market companies and importers. For the coming week, on the economic data front The US the week ahead, most of the eyes will be tied upon the Congressional budget statement for the month of August. The deficit is likely to widen which might be due to the lower tax collections from the citizens after the squat labor sector growth. The overall economic data could be weak from the US, but the issues in the Euro region could have a major effect on the strength of the USD. We expect the problems to continue in the Euro region for the coming weak so we could see the rupee to remain weak on the weakness of the Euro. RBI is also scheduled to meet on September 16 for its monetary policy review where its expected to raise rates by 25bps which might help the rupee slightly as we could expect more portfolio flows to come into the country. But overall we expect the rupee to remain weak for the coming week. No Major Economic data for week ahead

3 TECHNICAL SNAPSHOT Weekly chart of INR had given breakout on 13 Aug 2011 on closing basis. The pattern shows projected Target For the week strong resistance is and we can expect some profit booking from these levels to and will be strong supports on chart. MACD also entered above 0 line and will be moved upside with strong upside sentiment. RSI (14) also suggest buying movement for coming weeks. And it s taking support at and zones for next few weeks. Recommendation: Buy INR in the range of for the TGTs of with SL of 45.90

4 EUR/USD Currency Contract S2 S1 Close R1 R2 Recommendation EURUSD SPOT Sell at TP SL EURINR Sell at TP Aug SL EURINR Sell at TP Aug SL The Week Ahead: Euro to remain range bound with a negative bias Negative Economic data to weigh on Euro Greece fears to weigh on Euro Fundamental Review Euro had another bad week, in which sentiments switched from growing fear about the European banks to the weaker economic data releases. The euro slid to a three-month lows versus the USD as concerns mounted that Greece would not receive the next installment of the EU bailout package. The selling was briefly interrupted by the SNB's surprise announcement that it was putting a floor under EUR/CHF at , which provoked a brief spike. But to the end of the week with ECB keeping its rates unchanged the investors dumped the Euro. The euro lost by 3.89 percent to $1.3651, from $ on a weekly basis. Sep % % % Oct % % % Sep % % % Oct % % % Outlook The Euro completed a weekly loss as the euro as traders and investors dumped the single currency due to weaker economic data and the rates being kept unchanged by the ECB. The fresh fears of Greece heading into a default have made the Euro touch new monthly lows against the USD. Going forward we expect the US data to come in on a weak note, which could help the Euro to gains slightly in the middle of the week. But the fresh fears of German banks who are heavily invested in the Greece Debt could cause a councern and we could see the Euro heading lower. So for the coming week we might see some bouncebacks but these would prove temporary and could lead the Euro lower. Economic data for week ahead Date Time Region Event Survey Prior 09/14/ :30 EC Euro-Zone Ind. Prod. sa (MoM) JUL 1.50% 09/15/ :30 EC Euro-Zone CPI (MoM) AUG 0.20%

5 09/16/ :30 EC ECB Euro-Zone Current Account SA JUL /16/ :30 EC Euro-Zone Trade Balance sa JUL /14/ :30 EC Euro-Zone Ind. Prod. sa (MoM) JUL 1.50% Technical analysis: EUR/USD dropped sharply to as low as last week. The strong break of support, medium term trend line and 55 weeks EMA indicates that whole rally from has completed and the trend has reversed. Initial bias remains on the downside this week for 100% projection of to from at first. Break will path the way to 161.8% projection at , which is close to 1.3 psychological level. On the upside, minor resistance will turn bias neutral and bring consolidations. But recovery should be limited below resistance and bring fall resumption. Recommendation: EUR/USD: Sell at TP SL EUR/INR: Sell at TP SL GBP/USD Currency Contract S2 S1 Close R1 R2 Recommendation GBPINR MCX- SX Aug GBPINR Aug GBPUSD SPOT Fundamental Review The sterling fell by 2.01% against the greenback this week as global equity markets fell and raised fears abouth the healt of the global economy. The pound ended markedly lower against all its major counterparts. The weaker economic

6 data along the BOE keep rates unchanged even after a rising inflation kept the pound under pressure. The BOE has said it might bring in some stimulus to support the economy but this news was also not taken well by the traders as pound lost by more than 2% on a weekly basis. The pound lost by 2.03 percent on a weekly basis to give a close at Sep % % % Oct % % % Sep % % % Oct % % % Nov % % % Economic data for week ahead Date Time Region Event Survey Prior 09/13/ :00 UK CPI (MoM) AUG 0.60% Outlook The pound lost against the USD in the past week ending lower by 2.03 % on a weekly basis on weaker economic data. For the coming week economic data releases are expected to decline. And the fresh fears from the Euro zone are expected to keep the pound under pressure as it has alredy hit 6 week lows against the USD. There are not many data releases from the UK only the CPi data which is expected to come in lower than last time. Overall we see the GBP to remain in a rangebound move with slight weakness. Technical analysis GBP/USD's fall from extended further to as low as last week. Initial bias remains on the downside and deeper fall should be seen to key support level next. On the upside, break of resistance is needed to signal short term bottoming. Otherwise, outlook will remain cautiously bearish even in case of recovery. In the bigger picture, the break of trend line support (1.5344, ) argues that GBP/USD might have completed a head and shoulder top reversal pattern (ls: , h: , rs: ). Focus is now on support. Decisive break there should confirm that whole medium term rally from is finished at already and will turn outlook bearish. In such case, fall from could either be the fourth leg of the consolidation pattern from (2008 low) or resuming long term down trend from (2007 high). In either case, a test on /4229 support zone should be seen.

7 Recommendation: GBP/USD: GBP/INR: USD/JPY Currency Contract S2 S1 Close R1 R2 Recommendation JPYINR MCX- SX Aug JPYINR Aug USD/JPY SPOT Fundamental Review The yen closed on a weak from the last week as lack of economic cues and major news kept it in a tight range. The Yen lost in the beginning of the week but gained to the end on safe haven buying as the global equities suffered a slight blow. However as lack of triggers were there the yen ended on a weaker note with a loss of 1.07% on a weekly basis. The Yen closed at with a weekly loss of 1.07 percent Sep % % % Oct % % % Sep % % % Oct % % % Nov % % % No Economic data for week ahead Outlook The Yen lost for a second week even though the losses were majorly based on a weaker economic data. Going forward we can say Yen is stuck at crossroads as such high levels will call for an intervention from the Japanese policy makers but on the other hand till the turmoil in global markets continues we can expect safe haven buying to keep emerging. So for the coming week we can expect the Yen to remain range bound but any intervention could take it back to 80 levels again.

8 Technical analysis USD/JPY's consolidative trading from continued last week and despite edging higher to 77.85, there is no follow through buying so far. Further rise could still be seen with minor support intact. But after all, we'll stay bearish as long as and expect and eventual downside breakout. On the downside, below minor support will flip bias back to the downside for Break there will confirm resumption of the whole fall from Recommendation: USD/JPY: JPY/INR: Major economic events for the week Date Time Region Event Survey Prior 09/13/ :00 UK CPI (MoM) AUG 0.60% 09/13/ :00 US NFIB Small Business Optimism AUG /13/ :00 US Import Price Index (MoM) AUG -0.80% 09/13/ :30 US Monthly Budget Statement AUG -$132.0B 09/14/ :00 JN Industrial Production (MoM) JUL F /14/ :30 EC Euro-Zone Ind. Prod. sa (MoM) JUL 1.50% 09/14/ :00 US Producer Price Index (MoM) AUG -0.10% 09/14/ :00 US Advance Retail Sales AUG 0.20% 09/14/ :30 US Business Inventories JUL 0.50% 09/15/ :30 EC Euro-Zone CPI (MoM) AUG 0.20% 09/15/ :00 US Consumer Price Index (MoM) AUG 0.20% 09/15/ :00 US Consumer Price Index (YoY) AUG 3.60% 09/15/ :00 US Current Account Balance 2Q -$122.9B 09/15/ :00 US Empire Manufacturing SEP -4

9 09/15/ :00 US Initial Jobless Claims 10-Sep 411K 09/15/ :00 US Continuing Claims 3-Sep 3705K 09/15/ :45 US Industrial Production AUG 0.10% 09/15/ :45 US Capacity Utilization AUG 77.50% 09/15/ :30 US Philadelphia Fed. SEP /16/ :30 EC ECB Euro-Zone Current Account SA JUL /16/ :30 EC Euro-Zone Trade Balance sa JUL /16/ :30 US Net Long-term TIC Flows JUL $15.0B 09/16/ :30 US Total Net TIC Flows JUL /16/ :25 US U. of Michigan Confidence SEP P 56.6 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.