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Theme of the Day
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US Government shutdown continues. Consequently, the important data release of US nonfarm payrolls, generally due in the first Friday of the month, will not be released today.
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DXY:
The Dollar index continues to weaken for the sixth consecutive session, falling from 79.75 yesterday to 79.71 currently, marking the lowest level in 8 months. The partial shutdown of the US government, which is the first since 1996, is impacting USD negatively. Meanwhile, downbeat data prints (US ISM services index) and growth concerns on account of Government shutdown have led to some
speculation that Fed's QE-tapering might be delayed longer than previously expected. Meanwhile, owing to Government shutdown, the important data release of US nonfarm payrolls, generally due in the first Friday of the month, will not be released today. The intraday trend for DXY is bearish with support and resistance at 79.17 and 80.10 respectively.
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EUR/USD:
The Euro continues to trade stronger; currently trading at close to 1.3626 against USD. Services PMI were released for Euro economies yesterday. Although the services sector for EZ expanded marginally faster than the flash estimates suggested (52.2 vs. 52.1), German services expanded at
a slower pace (53.7 vs. 54.4). Although Italian service sector witnessed its first expansion in the past 27 months, Spanish services slipped back into contraction in September. Real retail sales in EZ grew 0.7% MoM (-0.3% YoY) in August 2013, as against a growth of 0.5% in July 2013. The intraday trend for the Euro is bullish, with support and resistance at 1.3550 and 1.3680 respectively.
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GBP/USD:
Sterling has weakened and fallen below 1.62 levels against USD. It is currently trading at close to 1.6170, as against yesterday's peak of 1.6240. UK services PMI shows that it fell slightly from its multi-year high of 60.5 in August to 60.3 in September. Consequently, the composite PMI index also slipped from 60.7 to 60.4 last month. Nevertheless, according to Halifax, house prices rose for the eighth consecutive month in September, rising at their fastest annual pace (+6.2% YoY, +0.3% MoM) in more than three years. The intra day trend for the GBP/USD cross is bullish with support and resistance at 1.6110 and 1.6270 respectively.
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USD/JPY:
Japanese Yen is currently trading at close to 97.10, slightly stronger than yesterday's close of 97.27. This is in line with the fact that Bank of Japan (BoJ) refrained from adding to unprecedented monetary stimulus after business confidence surged and Prime Minister Shinzo Abe decided that the economy was strong enough to weather a sales-tax hike. Technically, the intra day trend for USD/JPY cross is bearish with support at 96.80 and resistance at 97.80.
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USD/CHF:
The Swiss Franc has gained against both the US Dollar and the Euro on the back of its safe-haven appeal amidst subdued risk appetite. USD/CHF is trading lower at 0.8984 compared to yesterday's close of 0.8994 and EUR/CHF is lower at 1.2245 compared to yesterday's close of 1.2249. Technically, USD/CHF is expected to trade bearish with support at 0.8940 and resistance at 0.9085.
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AUD/USD:
The Australian Dollar is trading higher for the second consecutive day, hovering at around 0.9438 compared to yesterday's close of 0.9394, despite cautious risk sentiment. Reportedly unwinding of short AUD positions is providing support to the currency, as traders pushed back interest rate-cut expectations. Also, firm iron-ore prices are further aiding the currency. Technically, we expect AUD/USD to trade bearish with support at 0.9380 and resistance at 0.9520.
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USD/CAD:
The Canadian Dollar is trading slightly stronger vis-à-vis the US Dollar tracking the broad-based weakness in the greenback. Meanwhile, expectations that Canada's exports of crude oil would rise after the completion of TransCanada's Keystone XL oil pipeline is also supporting the Canadian Dollar. USD/CAD is currently trading lower around 1.0326 compared to yesterday's close of 1.0333. Intraday, markets look forward to Ivey PMI report, which is expected to show that activity expanded at a faster pace in September. Technically, USD/CAD is expected to trade bearish with support at 1.0300 and resistance at 1.0355.
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Sensex:
Indian equities opened lower this morning, tracking weak cues from global markets as the US budget impasse continues. Intraday, investors are likely to resort to profit-booking, following the substantial gains witnessed in the previous few sessions of trade, thereby limiting the upside. Markets will also look forward to India's services sector PMI, due later today. Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) yesterday cleared the USD 332 mn Jet-Etihad deal. Technically, Sensex is expected to trade in the range of 19700-20000.
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USD/INR:
Indian Rupee opened slightly weaker at 61.85 levels against previous close of 61.74. Weaker external cues led by concerns that a protracted US Government shutdown might affect global growth weighed on Indian currency. Market will look for cues from the Services PMI data scheduled to release later today. Intraday range for the Rupee is 61.65 - 62.45 with support at 61.65 and resistance at 62.20.
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G-Sec:
The Indian Government bonds opened slightly weaker this morning, paring some of yesterday's gains. The yield on the benchmark 7.16% bond due 2023 opened at 8.65% vs. Tuesday's close of 8.64%. RBI's announcement of an OMO buyback worth INR 100 bn, scheduled for Monday, has helped boost
sentiment in the Gsec markets in the past few sessions. However, gains today are likely to be limited ahead of the auction of dated securities worth INR 150 bn, due later today. Speculation is rife that the auction would see firm demand on the back of the recent liquidity supporting measures taken by the central bank.
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Oil:
Oil prices are trading slightly lower today morning, extending yesterday's losses amidst rising concerns that the protracted US Government shutdown would weigh on oil demand from the world's largest oil consumer. However, losses are likely to remain limited after several oil companies like
Exxon and Chevron Corp. curtailed output and evacuated personnel from the Gulf of Mexico, following a tropical storm. The region accounts for 23% of US oil production and more than 45% of petroleum refining capacity. Going ahead, markets would continue to track developments related to the US debt ceiling issue. WTI is currently trading at USD 103.2/bbl, compared to yesterday's close of USD 103.3/bbl. Brent is currently at USD 108.9/bbl vs. USD 109.0/bbl yesterday. Technically, Brent is expected to trade ranged between USD 107.95 -110.00/bbl.
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Gold:
Gold prices are trading little changed today morning, holding on to most of yesterday's gains. Bullion prices have been trading firm as the partial shutdown of the US Government has boosted the safe-haven appeal of the yellow metal. However, investment demand continues to weaken as
SPDR Gold Trust holdings declined further to 899.9 MT- the least since February 2009. Markets are expected to closely track developments related to the US debt-ceiling issue for further cues. Spot gold is currently at USD 1315.2/oz compared to prior close of USD 1316.9/oz. Technically gold is expected to trade ranged between USD 1290-1330/oz.
Please find attached herewith a file containing the detailed analysis.
Regards,
ICICI Bank : Treasury Research
Contact:
Samir Tripathi:
(+91-22) 2653-7233
Nikhil Gupta:
(+91-22) 2653-1414 (Extn: 2180)
Tadit Kundu:
(+91-22) 2653-1414 (Extn: 2087)
Pooja Sriram:
(+91-22) 2653-1414 (Extn: 2195)
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