Currencies Daily Report

Transcription

1 Currencies Daily Report Thursday 04 May 2017 Market Overview Wall Street ended slightly lower on Wednesday after the US Federal Reserve held interest rates unchanged and investors digested another heavy round of earnings reports. Asian stocks retreated on Thursday, taking their cues from a subdued session on Wall Street, while the dollar retained gains made after the Federal Reserve delivered a hawkish policy statement. The DXY rose around 0.2% to trade close to the mark with markets immediately shifting their focus to the jobless claims data due to be released today. The rupee is likely to open lower against the dollar today noting the greenback's strength globally after the US Federal Reserve maintained an optimistic view on the economy and hinted that it was on track to raise rates gradually. The Rupee as expected opened near a dollar as against at close Wednesday. The Indian currency is seen moving in the range of a dollar during the day. The FOMC kept a steady hand on the monetary tiller for May, wisely waiting for more concrete news on the fiscal front, which has proven a slower grind than expected given divergent party factions in the House that have denied a majority for the House leadership. Fundamentals have proven mixed since the last meeting, with seasonally subpar Q1 growth but still high expectations. The Fed left policy unchanged with a 0.75% to 1.00% target band. The Fed's statement acknowledged the Q1 slowing in growth but said it was "likely to be transitory," while core inflation "declined. For more of the guts of the statement, the Fed added that the labor market continued to strengthen, even as the economy slowed, while the unemployment rate "declined." Household spending rose only "modestly," but the fundamentals underpinning the continued growth of consumption remained solid. Business fixed investment "firmed." Meanwhile, annual inflation has been running close to the Committee's 2% longer run objective, but market-based measures remained low, with survey-based measures little changed. Risks to the outlook remain in balance. The vote was a unanimous 9-0. The outcome was mostly as expected, and the door was left open to a June hike despite some "transitory" hemming and hawing on slower growth and core inflation. Indices Last Close Previous Close % CHANGE NASDAQ DOW JONES NIKKEI HANGSENG Currencies Today Morning Yesterday at 05:00 PM % CHANGE DXY EURUSD GBPUSD USDJPY Today Morning Yesterday at 05:00 PM % CHANGE USDINR Spot IRF

2 USDINR Intraday Outlook The FX market was quiet through the morning session, with traders sidelined ahead of the FOMC announcement. The dollar initially rallied, then fell, then rallied again after the Fed, where there was no shift in policy, as expected. The statement indicated the Fed remains on track for a gradual pace of rate increases, and said the "solid" labor market continues to strengthen, with the near term risks to the outlook "roughly balanced". The US Federal Open Market Committee, in its statement, said the growth slowdown witnessed in the first quarter of 2017 was "transitory", and that "gradual" adjustments in the stance of monetary policy would allow economic activity to expand at a "moderate" pace and inflation to stabilise around 2% over the medium term. According to the CME Group's FedWatch Tool, Fed Funds future shows a 71.6% likelihood of a 25-bps rate hike when the FOMC next meets on Jun On Wednesday, the annualised premium on the contract ended at 5.01%, against 5.04% at the previous close. This is the daily chart of USDINR pair, during the last trading day the pair opened made a high of and saw the pair trading with sidewise to during the day, on indicator front RSI and price action signifies divergence on the spot basis and the pair signifies its likely to bounce, the pair has been trading in a narrow range in the range of and few days back and broke on the downside but could not sustain the lower levels and bounce strong resistance will come near spot and likely to find strong resistance there. Sideways BUY USDINR FUT TGT SL S3 S2 S1 Pivot R1 (Futures) R R Exporters Strategy Importers Strategy May Exports hedged at (Stop Levels) May imports partially hedged at 64.85/90 and 64.20/25

3 EURINR Intraday Outlook The Euro against the Dollar got hit from above 1.09 levels to test after the FOMC statement as the Dollar strengthened globally. Traders remained sidelined yesterday in the european session ahead of the FOMC. Euro support has come from Greece reaching a deal with the IMF and EU, along with a continued strong lead in French opinion polls for pro-eu presidential candidate Macron. Foreign exchange strategists in the latest Reuters poll have raised forecasts for the euro to a six-month high against the dollar, although the single currency is expected to edge down a little over the coming months. They warned, however, that a shock victory for anti-euro Marine Le Pen in Sunday's French presidential election could send the euro down 5 percent. The single currency has gained close to 4 percent so far this year, breaking a three-year losing streak during which it shed about a quarter of its value. ECB President Draghi is due to speak at the Jean Monnet Foundation, in Switzerland. This is the daily chart of EURUSD, the pair opened at and made a high of and reversed from the higher levels after the FOMC announcement, the pair was trading with some sidewise bias after gapped up few days ago and made a swing high of , the pair has been trading in a broader range of and on the up side with MACD indicator remaining but likely to trade in the narrow range for the day. Bullish BUY EURUSD TGT SL BUY EURINR FUT TGT SL S3 S2 S1 Pivot R1 R2 R3 (Futures) Exporters Strategy May exports to be held open with a stop below Importers Strategy May imports partially booked at levels. Remaining to be held with a stop above 70.50

4 GBPINR Intraday Outlook The UK April construction PMI beat expectations in rising to a headline reading of The median forecast had been for a modest contraction to 52.0 after the 52.2 reading in March. Residential construction and civil engineering activity drove the uptick in expansion in the sector. Both construction and the manufacturing PMI's have beaten expectations, rebounding from a recent soft patch and showing once again that the UK economy is performing resiliently as the sharp end of the Brexit process draws closer. Attention will now fall on the services PMI release today, as this sector accounts for nearly 80% of the economy. The Pound against the Dollar has managed to hold the crucial levels even after the FOMC statement when it dropped from to touch early today morning. This is the daily chart of GBPUSD, during the last trading day the pair after opening at made a high of and reversed from the higher levels after the FOMC meeting where dollar strengthen against majors, the breakout of the small pennant pattern above levels few days back and now likely to test the breakout levels with oscillator RSI remaining near overbought likely to see some correction in the pair, that can be utilized to buy the pair for medium term outlook until the pair close below 1.27 levels. Bearish SELL SL TGT SELL GBPINR FUT TGT SL S3 S2 S1 Pivot R1 R2 R3 (Futures) Exporters Strategy Importers Strategy May exports partially booked at levels. Stop for the remaining to be maintained at levels. May imports partially hedged at levels

5 JPYINR Intraday Outlook With the Japanese Yen continuing the weakness against the Euro approaching 123, it has also been under pressure against the Dollar where the USDJPY breached the barrier after yesterday's FOMC statement to currently trade at Market conditions have been thin, with Japan and Hong Kong out today, and with the former amid its Golden Week holiday period. A risk-on back-drop has been weighing on the yen in recent sessions, and we expect more of the same. The USDJPY Daily chart, the pair was with a positive bias after opening at and made a low of , the pair having support at and has been trending taking the support of 200DMA near 108 levels with a hammer pattern yesterday after the FOMC the pair surpass the levels of and now trading above going ahead likely to face a resistance near downward sloping trend line near 1113 levels but as trend remains on the buy side until the trend reverse. Sideways BUY USDJPY TGT SL SELL JPYINR FUT TGT SL S3 S2 S1 Pivot R1 R2 R3 (Futures) Exporters Strategy May exports partially booked at and Importers Strategy May imports partially booked at and

6 Economic Data for the Day Time Currency Data Forecast Previous 12:30 PM EUR Spanish Unemployment Change -78.2K -48.6K 02:00 PM GBP Services PMI :00 PM GBP Net Lending to Individuals m/m 4.5B 4.9B 06:00 PM USD Unemployment Claims 246K 257K 06:00 PM USD Prelim Nonfarm Productivity q/q 0.1% 1.3% 06:00 PM USD Prelim Unit Labor Costs q/q 2.5% 1.7% 06:00 PM USD Trade Balance -44.9B -43.6B 07:30 PM USD Factory Orders m/m 0.6% 1.0% 10:00 PM EUR ECB President Draghi Speaks 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.