Currency weekly 10 June 2013 Global economic review Last week, the global market ended on a negative note. A similar INDICES LAST 1 week ago % Change NIFTY 5881.00 5985.95-1.75 trend witnessed in the US equity markets too. ISM SENSEX 19429.23 19760.30-1.68 manufacturing numbers declined from 50.7 to 49 due to slower NASDAQ 3469.22 3455.91 0.38 consumption. Trade deficit widened from $38.8 billion to $40.3 DOW JONES INDUSTRIAL 15248.12 15115.57 0.88 billion due to the faster pace of growth in imports compared to SHANGHAI COMPOSITE 2210.90 2300.60-3.90 exports. ADP employment change and non-farm productivity NIKKIE 225 12877.53 13774.54-6.51 increased at a slower pace due to lower job additions and lower HANGSENG 21575.26 22392.16-3.65 income in the economy. The euro-zone and Germany's PMI FTSE Index 6411.99 6583.09-2.60 numbers improved on the back of increasing consumption patterns, which supported the shared currency. The European CROSS LAST 1 week ago % Change Central Bank kept its interest rate unchanged. The 45 minute EURUSD 1.3218 1.2999 1.68 ECB press conference was where chief Draghi stated that the GBPUSD 1.5558 1.5198 2.37 euro-zone s inflation in 2013 would be 1.4% with a target of USDJPY 97.5600 100.4500-2.88 1.3% is in 2014 in order to fix the recessionary situation. The USDCAD 1.0197 1.0375-1.72 German trade balance and current account balance increased USDCHF 0.9360 0.9551-2.00 more than expected, with improvements in imports and exports. USDSEK 6.5588 6.6202-0.93 Last week, Japan s vehicle sales contracted 7.30%, coupled with DOLLAR INDEX 81.6690 83.3750-2.05 weak capital spending. Foreign buying of Japanese bonds and stocks declined last week on the back of ongoing economic concerns. Japan'x official reserve assets declined from $1258 billion to $1250 billion. From China, non-manufacturing PMI slipped from 54.5 to 54.3. HSBC manufacturing has slowed from 50.4 to 49.2 due to a decline in new export orders as well as new orders. Chinese imports declined more than export trades. India s PMI manufacturing numbers declined to 50.1 from 51 due to lower export trades. India s service sectors showed improvement on the back of improving industrial production Dollar Index Currency S2 S1 Close R1 R2 Recommendation Dollar Index 79.73 80.70 81.66 82.03 83 Range 81-83 TECHNICALSNAPSHOT:- The dollar ended the week at the 81.66 level, shedding more than 2.7% for the week. It witnessed a high of 83.37 and a low of 81.07. It has broken below the upward moving trend-line on the weekly charts. Going by the fibonacci projections, the dollar has retraced 61.8% of its swing high 84.49 and swing low of 78.91. On the daily chart, the candlestick pattern depicts a tweezer bottom formation. There is a cluster of evidence stating that strong support could be found at close to the 81 levels and a pullback could be expected in the coming days if it manages to sustain above those levels. However, a breach below 81 could propel further selling and lead it to support at the 80.54 and80.10 levels. The resistance is at 82.03 followed by the 83 level. Overall, we expect the dollar to trade in a range of 81-83 levels for the week and recommend selling on pullbacks 1
USD/INR Currency Contract S2 S1 Close R1 R2 Recommendation USDINR- MCX-SX June -13 56.19 56.72 57.25 57.55 57.85 Buy at 57.10 TP 57.55 then 57.85 SL Below 56.60 USDINR-NSE June-13 56.19 56.72 57.25 57.55 57.85 Buy at 57.10 TP 57.55 then 57.85 SL Below 56.60 Fundamental Review Last week, the rupee depreciated around a percent against the dollar and settled at 57.065 from previous close at 56.505. The Nifty and Sensex index lost 1.75% and 1.68% last week, settling at 5881 and 19429.23 respectively, supporting the downside in the rupee. The weakness in the domestic indices was due to the foreign institution investor (FII) statistics showing a net outflow of $39.66 million. Foreign currency assets fell $3.06 billion to $258.5 billion in FOREX reserve holdings which influenced the rupee last week. India s HSBC PMI manufacturing data declined from 51 to 50.1 while services improved slightly. On the global front, Asian equities closed on a negative note led by the Japanese Topix and Nikkei indices which fell more than 6% last week. This reflected on domestic indices as well as on the rupee. However, the euro settled on a positive note at 1.3218 against the dollar, up 1.68%. The dollar index fell 2.05% against the key currencies and settled at 81.669. MCX-SX Jun-13 56.8400 57.3275 56.4925 57.2525 0.81% 10606726 35.91% 939933-2.79% Jul-13 57.1000 57.5850 56.7800 57.5125 0.78% 468527 12.35% 285173 12.35% Aug-13 56.5000 57.5225 56.3000 57.7500 0.78% 73682 9.40% 77671 12.12% NSE Jun-13 56.8550 57.3250 56.4950 57.2525 0.80% 13037100 20.50% 1869374 5.80% Jul-13 57.1025 57.5825 56.7825 57.5150 0.78% 789655 0.90% 631643 23.25% Aug-13 57.3600 57.8150 57.0500 57.7450 0.74% 146145 20.04% 138598 19.81% Fundamental Outlook: In the coming week, we expect the rupee to extend its weakness further against the dollar. Declining foreign currency holdings in the FOREX reserve may weaken the rupee. India will release its import and export data. Import trades are expected to increase at a faster pace compared to exports due to higher gold import in May. India s car sales are likely to decline on the back of lower consumer spending. Industrial production is also expected to slow down on the back of lower manufacturing activities and lower capital investment. India s Wholesale Price Index is likely to increase at a slower pace on the back of rising oil prices and inflation in the retail sector. At the global front, The Bank of Japan's interest rate decision will be keenly awaited, where the BoJ is likely to keep its interest rate unchanged and maintain its asset purchase program. Japan will release its GDP growth data, which is expected to improve on the back of continued monetary easing. Expectations of a weak GDP deflator may offset the gains from better GDP numbers. This may reflect on domestic indices and the rupee as well. from Europe, the Central Bank has clearly indicated that the euro-zone's economy could revive in the last quarter of 2013 and may post a positive growth. German consumer and wholesale prices are expected to improve, backed by the improvement in the trade data. The euro-zone's industrial production is expected to decline due to higher unemployment and weakness in consumption. Overall, we expect the shared currency to remain slightly positive and limit the rupee's losses. The US will release its NFIB Small Business Optimism, Wholesale Inventories, Advance Retail Sales and Michigan Confidence number. The economic data may limit the dollar's losses next week. Overall, we expect the rupee to trade on a weaker note against the dollar 2
Economic data for week ahead Date Time Region Event Period Survey Prior 10-17 JUN IN Imports YoY% May -- -- 10-17 JUN IN Exports YoY% May -- -- 06/12/2013 11:00 IN Industrial Production YoY Apr 2.30% -- 06/14/2013 12:00 IN Monthly Wholesale Prices YoY% May 4.86% -- TECHNICALSNAPSHOT:- The rupee ended on a positive note at the 57.06 level for the fifth consecutive week, a gain of 1% or 0.56 paisa. During the week, the rupee witnessed a high of 57.12 and a low of 56.31. During the same period a year ago, the rupee touched an alltime high of 57.32 (22-06-2012). A level which it couldn t sustain followed by a sharp decline over the following week to hit a low at 51.35 level on (05-10-2012). This is clearly an important level to watch out for in the coming week and, the subsequent reaction that arises out of it should lead to a new move in price direction. The overhanging supply factor could be crucial at this level (57.32).This move in the rupee was supported by a rise in the relative strength index from 64 last week to 67 this week. On the daily chart, the average directional index has moved to the 45 level, suggesting a strongly trending market. However, the same has not been reflecting in the weekly charts where the average directional index is still at 14 (suggesting a lackluster market on a weekly time frame ). On the daily charts, a vertical rise from 53.64 to 57.12 has led to the formation of too many internal trend-lines. This upmove may continue as long as there is no valid breach of the last formed internal trend-lines. Overall we expect the rupee to trade in a range of 56.80-57.65 levels for the week and recommend buying on declines Recommendation: USDINR (Spot) : Buy at 56.90 TP 57.35 then 57.65 SL Below 56.40 USD/INR-JUNE-MCX-SX/NSE: Buy at 57.10 TP 57.55 then 57.85 SL Below 56.60 3
EUR/USD Currency Contract S2 S1 Close R1 R2 Recommendation EURUSD SPOT 1.2810 1.3014 1.3218 1.3364 1.3510 Buy at 1.3170 TP 1.3350 SL Below 1.2940 EURINR-MCX-SX June-13 72.86 74.36 75.8675 76.65 77.44 EURINR-NSE June-13 72.86 74.36 75.8675 76.65 77.44 Buy at 75.20 TP 76.65 SL Below 74.30 Buy at 75.20 TP 76.65 SL Below 74.30 Fundamental Review Last week, the euro appreciated 1.68% against the dollar and settled at 1.3218 from the previous close of 1.2999. The euro-zone and Germany's PMI numbers improved on the back of increasing consumption patterns, which supported the shared currency. The European Central Bank kept its interest rate unchanged. The 45 minute press conference by ECB chief Draghi where he stated that the euro-zone s inflation in 2013 would be 1.4% with a target of 1.3% is in 2014 in order to fix the recessionary situation. The German trade balance and current account balance increased more than expected, with improvements in imports and exports. The above factors supported the euro in last week MCX-SX Jun-13 73.7450 75.9475 73.6550 75.8675 2.91% 254821 16.72% 64056 17.12% Jul-13 74.0825 76.3100 73.5425 76.1875 2.94% 27625 122.30% 13191 71.07% Aug-13 74.3000 76.4950 74.1025 76.4900 3.10% 902 82.96% 620 63.16% NSE Jun-13 73.6550 75.9525 73.6550 75.8775 2.93% 213453-2.71% 77258 5.21% Jul-13 73.4225 76.2725 73.4225 76.1875 2.96% 38881 74.27% 24723 67.86% Aug-13 75.2000 76.4500 73.6900 76.3125 2.80% 4698 92.54% 4298 76.95% Fundamental Outlook In the coming week, we expect the euro to trade on a positive note against the dollar. The European Central Bank has clearly indicated that the euro-zone's economy would revive in the last quarter of 2013 and may post a positive growth in the next year (2014). The German consumer and wholesale prices are expected to improve, backed by the improving trade balance. The eurozone industrial production is expected to decline due to higher unemployment and weakness in consumption. Economic data for week ahead Date Time Region Event Period Survey Prior 06/10/2013 14:00 EC Sentix Investor Confidence Jun -11.3 -- 06/12/2013 11:30 GE Consumer Price Index (MoM) May F 0.40% -- 06/12/2013 14:30 EC Euro-Zone Ind. Prod. sa (MoM) Apr 0.00% -- 06/13/2013 11:30 GE Wholesale Price Index (MoM) May -- -- 06/13/2013 13:30 EC ECB Publishes Monthly Report 06/14/2013 14:30 EC Euro-Zone CPI (MoM) May 0.10% -- 4
Technical snapshot:- The euro ended the week at 1.3219, a gain of 1.75%. The pair witnessed a high of 1.3305 and a low of 1.2952. In doing so, it has clearly broken out of the descending triangle formation on the weekly chart which could have bullish implications in the intermediate term. This move has been further supported by an uptick in the relative strength index which has gone up from 48 to the 55 levels. Going by the Fibonacci projections, it has retraced more than 50% (1.3230) of its swing range (1.3711-1.2744) but fell short of testing the 61.8% retracement level at 1.3340 by 0.0035 points. Overall, we could expect the euro to trade in a range of 1.3160-1.3350 for the week and recommend buying on declines 5
GBP/USD Currency Contract S2 S1 Close R1 R2 Recommendation GBPINR-MCX-SX June-13 85.08 87.07 89.0775 90.14 91.22 GBPINR-NSE June-13 85.08 87.07 89.0775 90.14 91.22 GBPUSD SPOT 1.4913 1.5054 1.5200 1.5288 1.5381 Buy at 87.80-87.90 TP 90.15 SL Below 87.00 Buy at 87.80-87.90 TP 90.15 SL Below 87.00 Buy at 1.5480 TP 1.5670 SL Below 1.5350 Fundamental Review : Last week, the pound appreciated 2.37% against the dollar and settled at 1.5558. The UK's PMI has improved from 49.8 to 51.3, supporting the pound against the dollar. PMI construction numbers have improved due to higher demand for property. New car registrations also showed improvement at a slower pace. Last week, the Bank of England kept its interest rate unchanged and maintained its 375 billion pound asset purchase program MCX-SX Jun-13 86.3500 89.2250 86.1525 89.0775 3.22% 157977 36.89% 21817 12.48% Jul-13 86.6425 89.500 86.500 89.4225 3.19% 12004 226.11% 3983 97.77% Aug-13 86.9000 89.5 86.9 89.5 3.10% 96 255.56% 119 417.39% NSE Jun-13 86.335 89.2225 86.155 89.08 3.25% 124145 26.42% 29337 14.29% Jul-13 86.6775 89.5225 86.5200 89.4000 3.18% 13837 131.54% 6507 107.10% Aug-13 86.8000 89.7050 86.8000 89.6000 3.13% 1006 131.80% 985 173.61% Economic data for week ahead: Date Time Region Event Period Survey Prior 06/11/2013 14:00 UK Industrial Production (MoM) Apr 0.00% -- 06/11/2013 14:00 UK Manufacturing Production (MoM) Apr -0.20% -- 06/14/2013 14:00 UK Construction Output YoY Apr -4.10% -- Fundamental Outlook In the coming week, we expect the pound to trade on a weaker note against the dollar. The UK will release its industrial production which is likely to remain weak in the month of April due to lower manufacturing activity. The construction activity is also expected to remain lower 6
Technical snapshot The cable ended the week at the 1.5562 level, a gain of 2.41%. This has been the highest closing in the last 5 weeks. The other crucial level is the 200-day exponential moving average level on the daily chart which is at 1.555. Subsequent closes above that level could inhibit further bullishness in the coming days. However, sustaining below the same could cause some profit booking. Going by the Fibonacci projections, the cable has retraced more than the 50% (1.5600) of its swing range ( 1.6380-1.4829). Sustaining above this could lead towards its 61.8% level (1.5780).Supporting the upmove has been the relative strength index, which moved up from 41 to 52. Overall, we could expect the cable to trade in a range of 1.5470-1.5770 and recommend buying on declines. 7
USD/JPY Currency Contract S2 S1 Close R1 R2 Recommendation JPYINR-MCX-SX June-13 55.03 57.44 59.8475 61.11 62.37 Buy at 58.70 TP 60.70 SL Below 57.30 JPYINR- NSE June-13 55.03 57.44 59.8475 61.11 62.37 Buy at 58.70 TP 60.70 SL Below 57.30 USD/JPY SPOT 91.93 94.72 97.51 100.53 103.53 Sell at 99.90 TP 96.25 then 94.5 SL Above 101 Fundamental Review Last week, the yen appreciated 2.88% against the dollar and settled at 97.56 from the previous close of 100.45. The weakness in Japanese equities, especially the Topix and Nikkei indices which fell around 6.94% and 6.51% respectively supported the yen to appreciate against the dollar. Last week, Japan s vehicle sales contracted by 7.30%, coupled with weak capital spending. Foreign buying of Japanese bonds and stocks declined last week on the back of ongoing economic concerns. Japan's official reserve assets declined from $1258 billion to $1250 billion MCX-SX Jun-13 56.5425 59.9725 56.3 59.8475 5.84% 354554 71.12% 20328 67.13% Jul-13 56.69 60.215 56.5875 60.1075 5.74% 12229 217.88% 1712 29.11% Aug-13 57.165 58.2925 57.165 58.2925 3.32% 12 #VALUE! 4 #VALUE! NSE Jun-13 56.51 59.9975 56.3 59.8475 5.84% 288151 49.43% 20261 14.97% Jul-13 57.0425 60.185 56.6 60.115 5.76% 23769 121.75% 4320 0.00% Aug-13 56.86 60.5 56.8 60.2675 5.36% 462 122.12% 368 820.00% Economic data for week ahead Date Time Region Event Period Survey Prior 06/10/2013 05:20 JN GDP Deflator YoY 1Q F -1.20% -- 06/10/2013 05:20 JN Gross Domestic Product (QoQ) 1Q F 0.90% -- 06/10/2013 05:20 JN Current Account Total Apr 350.0B -- 06/11/2013 JN Bank of Japan Monetary Policy 06/11/2013 JN BOJ Target Rate 11-Jun -- -- Fundamental Outlook In the coming week, the Bank of Japan's interest rate decision will be keenly awaited in the markets. The BoJ is likely to keep its interest rate unchanged and maintain its asset purchase program. Japan will release its GDP data which is expected to improve on the back of continued monetary easing by the Bank of Japan while weak expectations of the GDP deflator may offset gains that occur from the better GDP numbers. Japan's trade balance is likely to decline on the back of higher exports compared to imports. This should weigh down on the current account balance. Overall, we expect the yen to trade on a weaker note against the dollar in the coming week. 8
Technical Snapshot:- The yen ended the week on a bearish note at 97.51 levels, shedding 2.87 %.It witnessed a high of 100.75 and a low of 94.95 levels. For a brief period in the week, the pair broke and traded much below the lower end of the rising trend channel but recouped losses to close marginally below the channel. Supporting the weakness has been the relative strength index which has dropped sharply from the 69 levels last week to 59. Overall, we could expect the yen to trade in a range of 95-100 levels for the week and recommend selling on pullbacks Major economic events for the week Date Time Region Event Period Survey Prior 06/08/2013 00:30 US Consumer Credit Apr $12.900B $11.058B 06/08/2013 07:43 CH Trade Balance (USD) May $20.00B $20.43B 06/08/2013 07:43 CH Exports YoY% May 7.40% 1.00% 06/08/2013 07:43 CH Imports YoY% May 6.60% -0.30% 08-15 JUN CH New Yuan Loans May 815.0B -- 08-15 JUN CH Money Supply - M2 (YoY) May 15.90% -- 06/09/2013 07:00 CH Consumer Price Index (YoY) May 2.50% -- 06/09/2013 07:00 CH Producer Price Index (YoY) May -2.50% -- 06/09/2013 11:00 CH Industrial Production YTD YoY May 9.40% -- 06/09/2013 11:00 CH Retail Sales YTD YoY May 12.60% -- 06/10/2013 05:20 JN GDP Deflator YoY 1Q F -1.20% -- 06/10/2013 05:20 JN Nominal GDP (QoQ) 1Q F 0.40% -- 06/10/2013 05:20 JN GDP Annualized 1Q F 3.50% -- 06/10/2013 05:20 JN Gross Domestic Product (QoQ) 1Q F 0.90% -- 06/10/2013 05:20 JN Current Account Total Apr 350.0B -- 06/10/2013 05:20 JN Adjusted Current Account Total Apr 380.0B -- 06/10/2013 05:20 JN Trade Balance - BOP Basis Apr - 729.9B -- 06/10/2013 10:30 JN Consumer Confidence May 44.7 -- 06/10/2013 14:00 EC Sentix Investor Confidence Jun -11.3 -- 10-17 JUN IN Imports YoY% May -- -- 10-17 JUN IN Exports YoY% May -- -- 10-12 JUN IN India Local Car Sales May -- -- 06/11/2013 11:30 JN Machine Tool Orders (YoY) May P -- -- 06/11/2013 14:00 UK Industrial Production (MoM) Apr 0.00% -- 06/11/2013 14:00 UK Manufacturing Production (MoM) Apr -0.20% -- 06/11/2013 17:00 US NFIB Small Business Optimism May 91.5 -- 9
06/11/2013 19:30 US Wholesale Inventories Apr 0.20% -- 06/11/2013 JN Bank of Japan Monetary Policy Statement 06/11/2013 JN BOJ Target Rate 11-Jun -- -- 06/12/2013 05:20 JN Machine Orders (MoM) Apr -8.20% -- 06/12/2013 11:00 IN Industrial Production YoY Apr 2.30% -- 06/12/2013 11:30 GE Consumer Price Index (MoM) May F 0.40% -- 06/12/2013 14:30 EC Euro-Zone Ind. Prod. sa (MoM) Apr 0.00% -- 06/12/2013 16:30 US MBA Mortgage Applications 7-Jun -- -- 06/12/2013 23:30 US Monthly Budget Statement May -$110.0B -- 06/12/2013 IN CPI (YoY) May 9.00% -- 06/13/2013 05:20 JN Japan Buying Foreign Bonds 7-Jun -- -- 06/13/2013 05:20 JN Japan Buying Foreign Stocks 7-Jun -- -- 06/13/2013 05:20 JN Foreign Buying Japan Bonds 7-Jun -- -- 06/13/2013 05:20 JN Foreign Buying Japan Stocks 7-Jun -- -- 06/13/2013 11:30 GE Wholesale Price Index (MoM) May -- -- 06/13/2013 13:30 EC ECB Publishes Monthly Report 06/13/2013 18:00 US Advance Retail Sales May 0.40% -- 06/13/2013 18:00 US Retail Sales Less Autos May 0.30% -- 06/13/2013 18:00 US Initial Jobless Claims 8-Jun 345K -- 06/13/2013 18:00 US Continuing Claims 1-Jun 2984K -- 06/14/2013 12:00 IN Monthly Wholesale Prices YoY% May 4.86% -- 06/14/2013 18:00 US Current Account Balance 1Q -$111.0B -- 06/14/2013 19:25 US U. of Michigan Confidence Jun P 84.5 -- Prepared by:- Aurobinda Prasad (aurobind@karvy.com) Research Head Rashmi Ranjita Sahoo (rashmi.sahoo@karvy.com) Fundamental Analyst Srikanth Rayipati (srikanth.rayipati@karvy.com) -Technical Analyst 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. 10