Morning Market Starter - October 9, 2013

[Rajesh Desai]

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From: <rese...@icicibank.com>
Date: Wed, Oct 9, 2013 at 10:52 AM
Subject: Morning Market Starter - October 9, 2013
To: stock...@gmail.com

Theme of the Day US President Barack Obama yesterday indicated his willingness to negotiate with the Republicans in order to find a temporary solution to the US Government shutdown and the debt-ceiling issue Speculation has risen that current US Fed vice-Chair Janet Yellen could soon be nominated to succeed Ben Bernanke as the next Fed Chairperson View Today DXY: The DXY index is currently hovering slightly higher around 80.10, compared to yesterday's close of 80.06, recovering after recent losses. The US Dollar received support as US President Barack Obama yesterday indicated his willingness to negotiate with the Republicans in order to find a temporary solution to the US Government shutdown and debt-ceiling issue. However, further upside in the US Dollar is expected to be limited given speculation that Fed QE-tapering might be delayed more than previously expected owing to known-dove Yellen's appointment as the Fed's next Chairperson, which could be announced as early as today. The intraday trend for DXY is bearish with support and resistance at 79.70 and 80.30 respectively. EUR/USD: The Euro is currently trading at 1.3560 against USD, lower than yesterday's high of 1.3605. A decline in Spanish index of industrial production (IIP) and German current account surplus might have led to a weaker Euro. IIP declined 4.0% YoY in Spain in August 2013, following a rise of 0.6% in July 2013. While manufacturing activities declined 3.4% YoY in August, mining & electricity contributed almost 90% of the decline in IIP, as they declined 19.0% and 6.6% respectively in August 2013. Besides, German merchandise exports declined 5.4% YoY in August 2013, which led to a fall in merchandise trade surplus from EUR 16.3 bn in August 2012 to EUR 13.1 bn in August 2013. Accordingly, German current account surplus narrowed from EUR 13.2 bn in August 2012 to EUR 9.4 bn this August. The intraday trend for the Euro is range bound, with support and resistance at 1.3535 and 1.3600 respectively. GBP/USD: Sterling is currently trading at close to 1.6065, lower than yesterday's high of 1.6120 against USD. GBP appears to be largely following the trends in EUR, as there was no major domestic data release yesterday in UK. Nevertheless, today is a heavy data release day. UK industrial production (IIP) for August 2013 will be released today, which is expected to grow 0.4% MoM, as against no growth in July 2013. Besides, UK foreign trade deficit is also estimated to narrow from GBP 9.85 bn in July 2013 to GBP 8.85 bn in August 2013. The intra day trend for the GBP/USD cross is bullish with support and resistance at 1.6040 and 1.6100 respectively. USD/JPY: Japanese Yen is currently trading close to 97.30, weaker than yesterday's high of 96.81. The yen has declined against all its 16 major peers after a White House official said President Barack Obama will nominate Janet Yellen today to head the Federal Reserve, boosting demand for higher-yielding assets. Technically, the intra day trend for USD/JPY cross is range bound with support at 97.00 and resistance at 97.40. USD/CHF: The Swiss Franc weakened against both the US Dollar and the Euro as the Swiss National Bank (SNB) Chairman Jordan said yesterday that the Central Bank will maintain its cap on the Franc (at 1.20 EUR/CHF) in the foreseeable future to ensure price stability. Jordan also said that the SNB was ready to undertake further measures if needed. USD/CHF is currently trading higher around 0.9058 compared to yesterday's close of 0.9038 and EUR/CHF is also higher around 1.2288 compared to 1.2268 yesterday. Technically, USD/CHF is expected to trade bearish with support at 0.9030 and resistance at 0.9100. AUD/USD: The Australian Dollar is trading higher around 0.9430 compared to yesterday's close of 0.9418 ahead of a slew of economic data releases from Australia's largest export destination - China. Markets look forward to China's trade statistics due on weekend and the Q3 GDP report (due to be released next week) which is expected to show an improvement in growth. Meanwhile, reported unwinding of short-AUD positions owing to pushing back of domestic interest rate-cut expectations, is also aiding the Aussie. Technically, we expect AUD/USD to trade bullish with support at 0.9400 and resistance at 0.9460. USD/CAD: The Canadian Dollar is trading weak for the third consecutive day amidst concerns of risks to growth emanating from the debt impasse in its largest trading partner, the US. The Canadian Dollar weakened 0.5% vis-à-vis the US Dollar yesterday as the IMF said that the Canadian economy would grow by around 1.5% YoY in 2013 and 2.25% in 2014, lower than the Canadian Central Bank's respective projections of 1.8% and 2.7%. The IMF also said that it expects the Bank of Canada to refrain from interest rate hikes until the second half of 2014. Meanwhile, trade data released yesterday also surprised on the downside, further weighing on the Loonie. USD/CAD is currently trading higher around 1.0370 compared to yesterday's close of 1.0365. Technically, we expect USD/CAD to trade bearish with support at 1.0350 and resistance at 1.0400. Sensex: Indian equities opened lower this morning, tracking weak overseas cues. Intraday, markets will eye the September trade data, which is expected to post a better reading over the previous month. Meanwhile, the IMF, in its latest World Economic Outlook, cut India's FY2014 growth forecast to 3.8% YoY from 5.5% YoY. This is likely to weigh on sentiment. Technically, Sensex is expected to trade in the range of 19800-20000. USD/INR: The Indian Rupee opened weaker at 62.07 compared to yesterday's close of 61.79, tracking weak global cues and losses in EM Asian currency peers. Intraday, markets will look forward to India's September trade balance data, due later today, for further cues. The intraday trend for USDINR is bearish with support at 61.80 and resistance at 62.50. G-Sec: The Indian Government bonds opened stronger this morning as sentiment remains supported following the liquidity easing measures announced by the RBI earlier this week. Meanwhile, RBI Governor Rajan yesterday said that inflation and financial stability remain prime concerns. The yield on the benchmark 7.16% bond due 2023 is currently at 8.49% vs. yesterday's close of 8.50%. The benchmark yield is expected to hover ranged between 8.46-8.52%. Oil: Oil prices are trading slightly higher today's morning on the back of some value-buying following the recent losses. However, the upside in WTI prices remains capped as the weekly report by the American Petroleum Institute, released yesterday, showed an increase in US crude oil stockpiles by 2.8 mn barrels last week. Going ahead, markets will look forward to the weekly report of the US Energy Department, due later today, for further cues. WTI is currently trading at USD 103.4/bbl, compared to yesterday's close of USD 103.3/bbl. Brent is currently at USD 110.0/bbl vs. USD 109.8/bbl yesterday. Technically, Brent is expected to trade ranged between USD 109.5 -110.5/bbl. Gold: Gold prices are trading slightly lower today morning, albeit holding on to most of previous session's gains. Prices have come under pressure on the back of fall in investment demand; holdings in the SPDR Gold Trust fell to 898.18 MT- the lowest since February 2009. Going ahead, markets are likely to closely track developments related to the US debt-ceiling issue, for further cues. Spot gold is currently at USD 1317.8/oz compared to prior close of USD 1319.2/oz. Technically, gold is expected to trade ranged between USD 1300-1340/oz. Please find attached herewith a file containing the detailed analysis. Regards, ICICI Bank : Treasury Research Contact: Nikhil Gupta: (+91-22) 2653-1414 (Extn: 2180) Pooja Sriram: (+91-22) 2653-1414 (Extn: 2195) Tadit Kundu: (+91-22) 2653-1414 (Extn: 2087)

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CA. Rajesh Desai