Weekly Report 17 th July 15 Research Team IFA Global
The Week That Was!!! Globally, the Greece drama ended on positive note as Greek prime-minister Alexis Tsipras accepted the deal, which will ensure strict fiscal discipline and major pension and financial sector reforms. A close look at deal terms indicates that current deal is even harsher than the deal presented on 29th June 2015. Hence Alexis Tsipras has lost the negotiation despite winning the referendum by significant margins. On one hand, the equity markets rejoiced the deal with DAX rising by more than 3% in current week. On the other hand, the currency markets witnessed heavy selling in EUR/USD pair, which fell to its two month low levels. The EUR/USD pair recovered slightly after ECB monetary policy meet, wherein Mario Draghi praised the economic progress in Euro-Zone. The currency market participants again showed they are more receptive to views of BoE governor, Mark Carney than the UK economic data. The GBP/USD pair surged to above 1.5600 levels as Mark Carney suggested that BoE is moving closer towards an interest rate hike. The pound ignored weak unemployment and CPI inflation numbers. The unemployment rate spiked to 5.6% raising concerns of weak economic recovery. The Bank of Japan has reduced the growth forecast, while keeping its monetary policy stance unchanged. A downward revision in growth outlook leads to sharp depreciation in Japanese Yen against the major currency pairs. On domestic front, the equity markets were buoyed by Greece deal and Chinese equity recovery, while ignoring weak IIP and manufacturing production numbers. India s May IIP number came in at 2.7% against the April reading of 3.36%. The Nifty index surged nearly 3% before closing above 8600 levels. On other hand, the bond yield reacted adversely to spike in June CPI inflation, which came in at 5.40% levels against the May reading of 5.01%. The latest spike in CPI inflation reinforces our view that RBI will not cut interest rate in August 3 meeting. The Week Ahead Globally, economic calendar of major economies will remain muted, which might lead a dull week for currency markets. The US dollar index, which gained despite the weak retail sales and manufacturing data, is expected to continue its positive momentum. The US FED Chairperson, Ms. Janet Yellen has maintained the US interest rate hike will be dependent on quality of economic data. The news flow from Greece will step aside for economic data from EURO Zone, which will become major driver for movement in Euro. The Australian dollar, which is trading near its six year low levels against greenback, will take further cues from RBA s minutes of meeting. The Reserve Bank of Australia had kept its monetary policy stance unchanged despite the broad weakness in Australian economy. The Australian economy has been struggling due to sharp decline in commodity prices and low demand from China. Going forward, the Australian dollar is expected to remain under pressure On domestic front, benchmark bond yield is expected to ease further as Reserve Bank of India rejected the high yield bids for its open market operations, which was conducted to tighten the liquidity. The equity markets will be primarily driven by corporate earnings data for first quarter of FY 15-16.
Charts of the week USDINR Weekly Chart USD/INR Weekly Chart In Weekly chart of USDINR, we are observing that the pair is trading very close to the long term trendline support which is at 63.10-15 levels. Prices have taken support three times near 63.30-35 levels, where the nationalized banks are buying. If 63.10 is breached, then we expect the USDINR pair could test 62.50 because it will be a break of a 4 year trendline support which has been tested more than 8 times. If 63.10 holds, then the pair will gradually move towards 63.90 and 64.20 where USDINR has taken resistance multiple number of times. DAX Weekly Chart DAX Weekly Chart In the weekly chart of DAX, we are observing that the prices are trading in a primary uptrend. Recently, the prices were trading in a FLAG type of a formation which is a continuation pattern. During the week, prices gave a breakout from this FLAG pattern with a GAP UP suggesting strength. Weekly RSI has also given a positive crossover. The primary uptrend in DAX has resumed and we expect the index to go up to levels of 12380 which is the previous top.
Economic Calendar of the upcoming week Date 21-July-Tue Event AUD Monetary Policy Meeting Minutes AUD CPI q/q GBP Monetary Policy Meet WTI Crude Oil Inventory GBP Retail Sales US Unemployment Claims JPY Trade Balance CNY Manufacturing PMI CNY Industrial Production y/y EUR German PMI USD Homes Sales USD Homes Sales : 7th Floor- Sangita Ellipse Sahakar Road Vile Parle (East) Mumbai 57 Email: admin@indiaforex.in
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