Currencies Weekly Report

Transcription

1 Currencies Weekly Report Monday 15 May 2017 Global Economic Review & Outlook ECB s President Draghi said it is too early to declare success for the economy BoE Gov Carney has axed all the expectations. U.S. Treasury Secretary Steven Mnuchin defended the Trump administration's plans North Korea fired a ballistic missile that landed in the sea near Russia on Sunday. ECB s President Draghi said it is too early to declare success for the economy because wages have not yet responded to the recovery, so it's not time to think about exiting QE. In effect, Draghi killed any expectation for tapering in the fall, which contrasts with the Fed s consistent message of tightening. BoE Gov Carney has axed all the expectations. Now most of the policymakers are skeptical about the rise in inflation, this level is looking more and more like a top. Going into the rate decision, many investors believed that the central bank would upgrade its growth and inflation forecasts with Carney recognizing the improvements in the economy. U.S. Treasury Secretary Steven Mnuchin defended the Trump administration's plans to save and create jobs for American workers during his meetings with G7 finance ministers at their annual meeting in Bari, Italy.He also reiterated the promise for tax reform in the United States, telling G7 ministers it remains a goal by the end of the year. North Korea fired a ballistic missile that landed in the sea near Russia on Sunday in a launch the United States called a message to South Korea days after its new president took office pledging to engage Pyongyang in dialogue. 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 appreciated marginally, comparing to previous week s close of Trading range for the week was Post the victory of Pro EU Macron in French Presidential election, there was some profit booking coming in EURO after making a high of 1.10 and US dollar has taken the advantage of this downfall and appreciated in the start of the week. Most of the economic data released in the previous week was mixed with JOLTS Job openings and PPI numbers exceeding the expectations and Core CPI and Retail sales data undershooting the estimates. Most of the fed officials who spoke in the previous week emphasized on price stability rather than upgrading the inflation targets, where Chicago Fed's Evans said it's extremely important the Fed hits its inflation goal. He also had long worried about the shortfall in inflation, which has underscored his dovish stance over the last several years. He added that the large balance sheet opens the Fed up to political pressures. Meanwhile, Rosengren said there's a fair amount of evidence that QE made a difference. Bullard seconded that sentiment, saying QE had a big impact on stocks and FX, but not so much on inflation. And he said it's still a "distinct possibility" in the next recession. Raising the inflation target is not a good tradeoff. The Fed's balance sheet could be trimmed to as low as $2 tln, about half of its current size. Looking forward we have, NY Empire State Manufacturing Index number to be reported on Monday 15th May. IEA Monthly Report along with Building Permits, Housing starts and Industrial Production to be reported on Tuesday 16th May. Philadelphia Fed Manufacturing Index numbers and Initial Jobless claims along with Philly Fed Employment and speech from FOMC Member Master are scheduled for Thursday 18th May. On Friday 19th May there are no datasets to be released but FOMC Member Bullard scheduled to speak. This is the daily chart of dollar index the Instrument during the week was trading in the range of on the higher side the pair after opening at was consolidated in the above mentioned range during the week, intermediate of lower high on the daily time frame signifies selling pressure at higher levels by the bears where the instrument could not surpass the levels of 100 and revered now that has been a strong support and if violates likely to head near levels in days to come so utilize rise to sell the pair. Weekly Bias Weekly Trading Strategy Weekly Range (SPOT) Bearish S SELL SL TGT S S Pivot R R R

3 Rupee Outlook Indian Rupee closed for the week at 64.24compared to previous week s close of Trading range for the week was Consumer prices in India increased 2.99 percent year-on-year in April of 2017, following a 3.81 percent rise in March and well below market expectations of 3.5 percent. It is the lowest inflation rate since the series began in 2012, driven by a slowdown in food prices. Inflation Rate in India averaged 7.13 percent from 2012 until 2017 Indian wholesale prices rose 3.85 percent year-on-year in April of 2017, following a 5.70 percent gain in February and below market estimates of a 5.98 percent rise. A slowdown in cost of manufactured products offset a faster increase in cost of food and petrol. 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 the range has expanded from the past week, the pair has been in a lower top and lower bottom formation in the daily time frame after breaking below the neckline of double top pattern on the downside and now the pair respecting the levels of on the downside, with trend following indicator MACD remaining on the negative territory expect the lower support of shall be violated and pair can drift lower. Weekly Bias Weekly Trading Strategy Weekly Range (SPOT) Bearish Sell USDINR SPOT SL TGT 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 Euro Outlook EURO closed for the week at compared to previous close of Trading range for the week was Earlier markets were looking for outcome of French Presidential elections with the investors being cautious about the Presidential rat race as risk for shared currency was increased if the far-rights Le Pen would win as next President of France and probabilities of Frexit would heighten. But before the run off poll between Le Pen and Macron, French media has declared that there are high chances of Pro EU candidate wining, as per the final debate which was held just a couple of days before the final round. Keeping this in mind, investors were optimistic about the election and had taken the pair to the levels of Post the elections and victory of Macron as next President, there was profit booking coming in EUR/USD and had driven the pair to the lows of Later the focus has shifted toward ECB, where despite stronger than expected data, ECB s President Draghi said it is too early to declare success for the economy because wages have not yet responded to the recovery, so it's not time to think about exiting QE. In effect, Draghi killed any expectation for tapering in the fall, which contrasts with the Fed s consistent message of tightening. Following Macron s victory, there was talk that the central bank could start reducing asset purchases as early as September and while that could still happen, the central bank is not ready to embrace the idea wholeheartedly because like many other central banks around the world, it doesn't believe that the recent uptick in inflation is durable. Looking ahead, ECB's Praet is scheduled to speak on Monday 15th May. GermanZEWEconomic Sentiment, Eurozone s Q1 GDP numbers and Trade Balance along with a speech ECB's Nowotny and Coeure are scheduled for Tuesday 16th May, Core CPI numbers are due to be released on Wednesday 17th May. ECB's ECB President Draghi and Lautenschlaeger are scheduled to speak on Thursday 18th May. German PPI number along with a speech from ECB's Praet and Constancio are due for Friday 18th May. 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 tested the psychological level of 1.and corrected from the higher levels and made a low of during the week, but was unable to fill the gap of and revered in daily Friday and formed a bull candle signifies bulls are back and pair likely to head higher and likely to test higher levels of 1.10 with MACD remaining on the positive side expect higher levels during the week. Weekly Bias Weekly Trading Strategy Weekly Range (SPOT) Bullish BUY EURUSD SL TGT BUY EURINR FUT TGT SL 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 British Pound Outlook British pound against US dollar has closed for the week ending 12th May at compared to the previous week s close of Trading range for the week was Despite weaker than expected economic data Pound has well managed to sustain the levels of 1.28 levels, as the market participants continued to remain optimistic on UK s economy, post PM called for SNAP ELECTIONS on 8th of June this year.as days passed by the focus was tilted towards BoE s quarterly report and monetary policy announcement with key emphasis on the inflation report as it will he the markets to shape further expectation for inflation throughout the fiscal but BoE Gov Carney has axed all the expectations. Now most of the policymakers are skeptical about the rise in inflation, this level is looking more and more like a top. Going into the rate decision, many investors believed that the central bank would upgrade its growth and inflation forecasts with Carney recognizing the improvements in the economy. Some even hoped there would be 2 dissents in favor of higher rates but instead, the Bank of England lowered its 2017 GDP forecast and attributed the entire recent pickup in inflation to the weak currency. In his speech, Carney focused on the weakness of household spending and GDP and emphasized that domestic costs and wages remain subdued. However the central bank s outlook was not entirely sanguine and for this reason, sterling fell, but did not crash. The central bank still expects wage growth to strengthen and the output gap to close on time. They also said the U.K. may need tighter policy than the yield curve implies as more upside news would push others to support a hike. With that in mind, the central bank s forecasts are based on a rate increase by the fourth quarter of 2019 not 2017 or '18. Looking further, CPI and PPI numbers are scheduled to be reported on Tuesday 16th May along with a speech from UK s PM Theresa May. Average Earnings Index +Bonus, Claimant Count Change and unemployment rate along with a speech from BoE MPC Member Haldane are scheduled for Wednesday 17th May. Retail sales data is due to be reported on Thursday 18th May. CBI Industrial Trends Orders are scheduled for Friday 19th May. This is the daily chart of GBPUSD pair, during the week the pair traded in the range of and was consolidating during the week, 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 test the levels of 1.30 on the higher side and trading in a narrow range for the week with strong supports at , now on Friday the pair had a doji kind of pattern signify indecision between bulls and bears until a fresh breakout comes pair likely to remain in the narrow range. Weekly Bias Weekly Trading Strategy Weekly Range (SPOT) Sideways BUY GBPUSD SL TGT BUY GBPINR FUT TGT SL (Futures) S S S Pivot R R R Exporters Strategy May exports partially booked at levels. Remaining stopped at Importers Strategy May imports partially hedged at levels

6 Japanese Yen Outlook USD/JPY closed for the week at compared to previous week s close of Trading range for the week was Key reason for this week s move was because of risk backdrop, which resulted in unwinding long positions in safe-haven assets. Adding to that expectations have heightened for a June rate hikewith Fed funds futures showing a 100% probabilities of a rate hike in June and 67% in December. Japan's docket kicked off today with April PPI, which rose to 2.1% y/y from 1.4% previously. Japanese Adjusted Current Account was reported at 1.73T and Current Account n.s.a was at 2.908T. Looking forward Tertiary Industry Activity Index numbers are scheduled for Tuesday 16th May, Industrial Production data on Wednesday 17th May. And Q1 GDP numbers are scheduled for Thursday, May 18, This is the dally chart of USDJPY pair, the pair was trading a range of and on the upside and violated the resistance zone at 113 trend line,and tested the levels of and saw some profit booking in the pair from the higher levels, the pair made a double top pattern on 30Mins time frame near and revered now 114 likely to act as a strong resistance and downward sloping trend line likely to act as a support and the pair likely to trade within the said range during the week. Weekly Bias Weekly Trading Strategy Weekly Range (SPOT) Sideways BUY USDJPY TGT SL SELL JPYINR FUT TGT SL 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 Economic Data for the Week Date Time Currency Data Forecast Previous :00pm USD Empire State Manufacturing Index :30am GBP Prime Minister May Speaks 2:00pm GBP CPI y/y 2.60% 2.30% 2:00pm GBP PPI Input m/m 0.10% 0.40% 2:00pm GBP RPI y/y 3.40% 3.10% 2:30pm EUR Flash GDP q/q 0.50% 0.50% 2:30pm EUR German ZEW Economic Sentiment :00pm USD Building Permits 1.27M 1.27M 6:00pm USD Housing Starts 1.26M 1.22M 6:45pm USD Capacity Utilization Rate 76.30% 76.10% 6:45pm USD Industrial Production m/m 0.40% 0.50% 7:30pm USD Mortgage Delinquencies 4.80% :00pm GBP Average Earnings Index 3m/y 2.40% 2.30% 2:00pm GBP Claimant Count Change 25.5K 2:00pm GBP Unemployment Rate 4.70% 4.70% 2:30pm EUR Final CPI y/y 1.90% 1.90% 8:00pm USD Crude Oil Inventories -5.2M :20am JPY Prelim GDP q/q 0.40% 0.30% 2:00pm GBP Retail Sales m/m 1.20% -1.80% 6:00pm USD Unemployment Claims 240K 236K 6:00pm USD Philly Fed Manufacturing Index :30pm EUR ECB President Draghi Speaks

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.