Currencies Weekly Report

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1 Currencies Weekly Report Powered by Karvy Forex & Currencies Pvt. Ltd. Monday 24 Jul 2017 Global Economic Review & Outlook Global equities this week touched all-time high on continued optimism over global macros, even Indian equities have made all-time highs following the footprints of the peers. Key happening which shaped the markets this week:- Mario Draghi has surprised the markets. Two more Republican Senatorsannounced their opposition. Bank of Japan has kept the interest rates unchanged in its latest policy meeting. UK political situation has kept the investors worry about future of UK economy. Mario Draghi has surprised the markets by saying that the measures of underlying inflation still remain INDICES Last Price Previous Week % CHANGE low and also indicated that core inflation will rise over the medium term as stimulus pass-through supports demand and favorable financing conditions help investment. He also said their survey results NASDAQ show a solid, broad-based recovery which would allow the investors to look into past where the central DOW JONES bank warned that it could boost the size and duration of QE if needed. Two more Republican Senators, Jerry Moran and Mike Lee, announced their opposition on last week to NIKKEI a revised Republican healthcare bill, delivering a serious blow to the legislation. They also said the bills HANGSENG won't pass and there would be no money for tax cuts for the Trumps administration. The CAC implementation of his fiscal policy will be difficult Bank of Japan has kept the interest rates unchanged in its latest policy meeting where the Central Bank DAX has raised the GDP forecast to 1.8 from 1.4 earlier for this fiscal and upgraded next fiscal forecast to 1.6 FTSE from 1.3. The Japanese Central Bank has cut its inflation forecast to 1.1% from 1.4 earlier. It also lessened the inflation forecast to next fiscal to 1.8% from 1.9%. It also said that the Japanese economy Currencies Last Price Previous Week % CHANGE is likely to continue at moderate expansion phase. DXY UK political situation has kept the investors worry about future of UK economy on back of the news that PM May is likely to remain in her office. Now PM May is seen as a weak leader by the markets and EURUSD also her Brexit strategy appears to be in shambles as of now. This news has kept the market GBPUSD participants to worry about the future of UK economy. 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 ending 21st July at compared to the previous week s close of Trading range for week was in-between on the higher side and on the lower side. The past week was been a nightmare for US dollar where it started the week on a weaker note following softer than expected US inflation data prior which led to raising doubts in the investor s community about the seriousness about further rate hikes by the Fed. Later in start of the week the focus was shifted toward the NY Empire State Manufacturing Index number which were dragged to an 8 month s low where the index has drifted to 9.80 in July where the same was reported at in June. Later the same week US dollar against majors further slid to lower levels on back of the news that two more Republican Senators, Jerry Moran and Mike Lee, announced their opposition on Monday to a revised Republican healthcare bill, delivering a serious blow to the legislation. The bills won't pass, there will be no money for tax cuts. The implementation of his fiscal policy will be difficult. This has kept the investors to worry about implementation of Trump s pro-growth policies. Later the dollar was dragged to a 2 year s low against EURO following the ECB policy meeting where ECB Chief Mario Draghi has signaled that policymakers would discuss changing its bond-buying program in the fall. Those comments signified that the European Central Bank would taper the QE in its September November policy meet. At the same time looking other central bank action in past week s showed that now only fed but even they are in phase of tightening. So going forward we have July Service & Manufacturing PMI along with June Existing Home Sales data to be on tap on Monday 24th July, S&P/CS HPI Composite - 20 n.s.a. and July Consumer Confidence figures are scheduled for Tuesday 25th July. On Wednesday, July 26 we have June New Home Sales data due to reported but the key focus would be on the FOMC meeting followed by the statement. Good Trade Order, Weekly jobless claims along with Core Durable Goods Orders are to be on the investor s radar on Thursday 27th July. On Friday 28th July we have Michigan Consumer Expectations and sentiment to be on tap but the focus would primarily remain on US Q2 GDP figures. The instrument traded in a broader range of on the higher side and on the lower side during the last week, and traded near 13 months lows the instrument had a bearish candle and had a strong session on the down side, the instrument had a trending session on the down side, the instrument likely to continue its trend until close above 95 levels. Weekly Bias Weekly Trading Strategy (SPOT) Weekly Range (SPOT) Bearish SELL TGT SL S3 S2 S1 Pivot R1 R2 R

3 Rupee Outlook Indian Rupee closed for the week at compared to previous week s close of Trading range for the week was in-between on the higher side and on the lower side. This week USD-INR has been traded in a tight range of 22 paisa. The key driver of the pair was inflows into booming Indian equity markets. With continued optimism over the GST which was implemented from 1st July Indian equities have touched all-high and where the NSE benchmark index Nifty has made an all-time high of 9, as on the day report was prepared and BSE Sensex has made an all-time high of 32, Coming to the economic data there are no major economic reports published from Indian economy. The focus also shifted was on US political situation as well as the investor s doubts on Federal Reserve s seriousness about hike the rate another time this year. These doubts have been raised because of softer than expected US inflation data the prior week.later in start of the week the focus was shifted toward the NY Empire State Manufacturing Index number which were dragged to an 8 month s low where the index has drifted to 9.80 in July where the same was reported at in June. Coming back to Indian context there are no major economical publications scheduled to be released but the focus would remain on US Federal Reserve s policy meeting on Wednesday 26th July. This is the daily chart of USDINR, the pair has traded in the broader range of on the downside and on the higher side, the pair has been trading side wise for couple of weeks, and the trend has been narrowing for many days, and trading near the 50DMA 64.45, the pair likely to trade in a range until range breakout on either side. Weekly Bias Sideways (SPOT) Weekly Trading Strategy BUY USDINR FUT TGT SL R Weekly Range (SPOT) R July Exports partially hedged at on Spot Imports hedged partially at on Spot. Pending imports booked around Spot

4 Euro Outlook EURO closed for the week at compared to the previous week s close of And EUR-USD pair for the week traded in between on the higher side and on the lower. EURO has started the week on an upbeat following the weakness in US dollar and made a high close to the 1.15 mark but furtherthepairfailedtoextendthegainsandbreachthe1.15mark ahead the ECB policy meet later the same week asinvestors worried thatmariodraghi would also disappointasdidjanetyellen. But Draghi has surprised the markets by saying that the measures of underlying inflation still remain low and also indicated that core inflation will rise over the medium term as stimulus pass-through supports demand and favorable financing conditions help investment. He also said their survey results show a solid, broadbased recovery which would allow the investors to look into past where the central bank warned that it could boost the size and duration of QE if needed. Although Draghi said tapering scenarios were not discussed at this meeting and the members spoke about what will happen in September. The ECB s President also said that they would start discussing tweaking stimulus sometime between September and November. These hawkishness in the tone of the top central banker boosted the confidence in the investors that the QE tampering program is no longer a distant and also now the investor expect ECB would tighten the rate soon in coming policy meet. This has helped the EURO against US dollar to hit a more than 23-months high at Looking into the economic data most of the data was at expectation which has further added some more boost. Now going forward German Service and Manufacturing PMI along EZ Markit Composite, Service and Manufacturing PMI scheduled to be released on Monday 24th July. On July Friday, 28th July we have German CPI number for the month of July to be on tap where the expectations are set at 0.2%. This week key movement would be because of the FOMC meeting which is scheduled for 26th of July. This is the daily chart of EURUSD the pairtrade in a broader range on the lower side and on the higher side during the last the week, the pair gave a breakout above after a long time and closed above 1.15 for many years, now euro is trading at multiyear high and now 1.15 likely act as a strong support and with MACD remaining on the positive side expects the pair to drift higher in coming session. Weekly Bias Weekly Trading Strategy Weekly Range (SPOT) Bullish BUY EURUSD TGT SL BUY EURINRFUT TGT SL R2 R3 (SPOT) July Exports partially hedged at on Spot. Pending exports booked at levels on Spot. July Imports to be partially booked at Spot

5 British Pound Outlook British Pound closed for the week at compared to previous week s close of And GBP-USD pair for the week traded in between on the higher side and on the lower. Despite the weakness in US dollar against major currency we have seen Pound remain under pressure since start of the week following softer than expected UK data where the consumer prices stagnated in June and while retail sales rose strongly but the increase in retail sales failed to convince the investors that BoE Governor Carney is serious about hiking the rates. Even spending recovered in June with retail sales rising 0.6%. Not only was this greater than the 0.4% forecast but it was validated by a 0.9% increase in core retail sales, which excludes auto fuel. And apart from the economic data even UK political has kept the investors worry about future of UK economy on back of the news that PM May is likely to remain in her office. Now PM May is seen as a weak leader by the markets and also her Brexit strategy appears to be in shambles as of now. This news has kept the market participants to worry about the future of UK economy and have sold on the higher levels of Now looking forward we have CBI Industrial Trends Orders to be reported on Tuesday 25th July. BBA Mortgage Approvals are scheduled to be published on Wednesday 26th July but the key focus would be on the UK Q2 GDP numbers where the expectation are set at 1.7% year-on-year. If data supports with being better than expectation we can see a relif rally in GBP- USD pair but these gains would be quickly faded as the markets are more eager about UK political situation and until there is any progress on the Brexit talks the pair could see more selling over the near term. This is the daily chart of GBPUSD pair the pair traded in the broader range of on the higherand on the lowerside during the last week and reversed from the higher levels and could not sustain the breakout the of , the pair has breakout few months back above 1.27 with a golden cross 50DMA cross above 200DMA now with 50DMA at and prices are trading above and with MACD remaining above the zero line expects some volatility with supports at levels. Weekly Bias Weekly Trading Strategy Weekly Range (SPOT) Sideways-Bullish BUY GBPUSD TGT SL BUY GBPINR FUT TGT SL R2 R4 (SPOT) July Exports partially hedged at on Spot July Imports partially booked at & All pending imports to be booked targeting 82.50

6 Japanese Yen Outlook Japanese Yen closed for the week at compared to previous week s close of And GBP-USD pair for the week traded in between on the higher side and on the lower.since start of the week Japanese Yen against US dollar has been appreciating dragging the USD-JPY pair to the lower levels of and the key reason for this was because of the sell-off in US-dollar following softer than expected US data which raised doubts on Yellen s seriousness on raising the interest rates. Later the focus shifted towards US healthcare bill where 2 senators withdrew from supporting the Trump s administration which further kept US dollar under pressure. And later the dollar was dragged to a 2 year s low against EURO following the ECB policy meeting where ECB Chief Mario Draghi has signaled that policymakers would discuss changing its bondbuying program in the fall.coming to BoJ policy meet yesterday, Bank of Japan has kept the interest rates unchanged in yesterday s policy meeting where the Central Bank has raised the GDP forecast to 1.8 from 1.4 earlier for this fiscal and upgraded next fiscal forecast to 1.6 from 1.3. The Japanese Central Bank has cut its inflation forecast to 1.1% from 1.4 earlier. It also lessened the inflation forecast to next fiscal to 1.8% from 1.9%. It also said that the Japanese economy is likely to continue at moderate expansion phase.looking ahead we have BoJ smonetary Policy Meeting Minutes of 20th July scheduled to be reported on Tuesday 25th July. And on Friday, July 28 we have Japanese Household Spendingfor June, Jobs/applications ratio and National Core CPI to be on tap. This week s key focus would be on the FOMC meeting on 26th July and US Q2 GDP numbers, if the both are being not supportive to US dollar than we can expect USD-JPY pair to test the mark. This is the daily chart of USDJPY pair, the pair traded in a broader range of on the higher side and on the lower side, the pair violated the support of recent swing support and 50DMA previous week the pair reversed from the higher levels near the supply zone from now next levels of support comes in at 109 and likely to act as a strong resistance with MACD remaining on the negative side expects the pair to find supply at higher levels. Weekly Bias Weekly Trading Strategy Weekly Range (SPOT) Bullish SELL USDJPY TGT SL BUY JPYINR FUT TGT SL R2 R4 (SPOT) July Exports to be partially hedged targeting on Spot July Imports partially booked at & on Spot. Next tranche to be booked targeting 56.30

7 Economic Data for the Week Date Time Currency Data Forecast Previous :30 PM EUR French Flash Manufacturing PMI French Flash Services PMI :00 PM EUR German Flash Manufacturing PMI German Flash Services PMI :30 PM EUR Flash Manufacturing PMI Flash Services PMI :30 PM USD Existing Home Sales 5.59M 5.62M :30 PM EUR German Ifo Business Climate :30 PM USD CB Consumer Confidence :30 PM GBP MPC Member Haldane Speaks :00 PM GBP Prelim GDP q/q 0.30% 0.20% 7:30 PM USD New Home Sales 615K 610K 8:00 PM USD Crude Oil Inventories -4.7M 11:30 PM USD USD FOMC Statement Federal Funds Rate <1.25% <1.25% :00 PM USD Core Durable Goods Orders m/m 0.40% 0.30% Unemployment Claims 242K 233K Durable Goods Orders m/m 3.20% -0.80% All Day EUR German Prelim CPI m/m 0.20% 0.20% 12:30 PM Spanish Flash CPI y/y 1.50% 1.50% Spanish Flash GDP q/q 0.90% 0.80% 6:00 PM USD Advance GDP q/q 2.50% 1.40% Advance GDP Price Index q/q 1.30% 1.90% 7:30 PM Revised UoM Consumer Sentiment Report prepared by: Siddhesh Ghare Deepak Agarwal Shashank Damaraju 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.