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Theme of the Day
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Recent comments by various Fed officials continue to raise concerns that the Fed might begin scaling down its monetary stimulus in September itself, thereby weighing on global risk sentiment. Joining the chorus of Fed officials, Dallas Fed's Fisher said on Friday that the Fed should begin tapering asset purchases from September onwards if the economic reports remain "favourable".
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DXY:
Dollar index is trading stronger at 81.25 levels presently as compared to Friday's low of 81.05 levels. The strength in Dollar index is broad based, getting support after US 10-year Treasury yields set a two-year high of 2.866% on the back of expectations that the Federal Reserve could start paring back its bond purchases in September. Market will look for cues from the minutes of the Federal Reserve's July 30-31 policy meeting, due to be
released later this week. Meanwhile, Fed official Fisher commented that the Fed should begin tapering its pace of asset purchases from next month onwards if the economic reports remain "favourable". He added that employment is picking up and the housing market "has turned." The intraday trend for the DXY is bullish with support and resistance at 81.00 and 81.85 respectively.
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EUR/USD:
The Euro is largely unchanged from its previous closing of 1.3329, currently trading at 1.3330 levels. The headline inflation in Euro Zone (EZ) was 1.6% YoY in July 2013, same as that in the previous month. Fruits & vegetables had the highest impact on headline inflation last month.
Core inflation was also unchanged at 1.4% YoY in July 2013. The first estimate of EZ's foreign trade in goods showed a surplus of EUR17.3 bn in June 2013, as against a surplus of EUR14.5 bn in May 2013. On seasonally adjusted basis, exports rose by 3.0% MoM and imports by 2.5% MoM in June 2013. The intraday trend for the Euro is ranged, with support and resistance at 1.3285 and 1.3375 respectively.
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GBP/USD:
The British Pound also continues to trade strong at above 1.5625, as against last week's closing of 1.5629. In line with improving business and consumer conditions, Confederation of British Industry (CBI) has revised its growth forecasts from 1.0% to 1.2% this year and from 2.0% to 2.3% for 2014. The Group also said the unemployment rate will fall to 7.6% next year, after remaining at 7.8% this year. The intra day trend for the GBP/USD cross is bullish with support and resistance at 1.5595 and 1.5680 respectively.
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USD/JPY:
The Japanese Yen (JPY) also held to its gains, as the currency continues to trade at close to 97.57, as against 97.53 levels at the end of Friday. Weaker yen and better recovery in the US and Europe has helped Japanese exports to grow 12.2% YoY last month, the highest growth since 2010. Imports also grew 19.6%, which led to a trade deficit of JPY 944 bn, much higher than the expected deficit of JPY 741 bn. Growth prospects will be the key in determining the future of a hike in the sales tax next month, which could act as a drag on consumption. Technically, the intra day trend for USD/JPY cross is bullish with support at 97.00 and resistance at 98.00.
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USD/CHF:
USD/CHF is currently trading slightly lower at 0.9260, compared to Friday's close tracking slight weakness in the US Dollar today morning. The EUR/CHF continues to hover flat around 1.2347. However, there remains possibility of some upward movement in the EUR/CHF pair in the near-term if economic data prints from Eurozone continue to indicate improving growth prospects. Technically, USD/CHF is expected to trade bearish with support at 0.9205 and resistance at 0.9300.
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AUD/USD:
The Australian Dollar is trading higher for the fourth consecutive day, hovering around 0.9217 compared to Friday's close of 0.9185, despite rising concerns over early QE-tapering by US Fed. The Australian Dollar continues to find support from paring of short positions. According to latest CFTC data, net short positions on the Australian Dollar declined in the week ending August 13th. Meanwhile, iron-ore prices rose to their highest levels in five-months, thereby further aiding the Aussie, with Australia being its major exporter. Technically, we expect AUD/USD to trade bullish with support at 0.9160 and resistance at 0.9280.
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USD/CAD:
The Canadian Dollar is trading largely slightly stronger today morning albeit holding on to most of Friday's losses. The Canadian Dollar had weakened on Friday by 0.3% as domestic manufacturing sector data surprised on the downside. Concerns of early QE-tapering by the US Fed also weighed on the Loonie. USD/CAD currently is trading lower around 1.0325 compared to yesterday's close of 1.0336, but higher than Friday's intraday levels of 1.0295. Technically, we expect USD/CAD to trade ranged with support at 1.0250 and resistance at 1.0375.
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Sensex:
Indian stock markets opened lower, tracking weak overseas cues. Rising speculation of possible additional measures by the government to restrict capital outflows in a bid to stem the fall in the Rupee is likely to weigh on sentiment. However, some value-buying following the sharp losses incurred in Friday's trade may lend some support to equities. Meanwhile, in Friday's trade, the benchmark indices posted their largest intraday decline since September 2011, led by losses in banking stocks. Technically, Sensex is expected to trade in the range of 18300-18700.
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USD/INR:
USDINR opened at a fresh all time high of 62.35 as against previous close of 61.65 tracking weakness in some of the EM Asian currency peers and continued strength in the US Dollar. Higher crude oil prices and Dollar demand by crude oil importers is likely to weigh on the currency. The Rupee is also likely to track movements in
domestic equities intraday for further cues. Meanwhile, the slew of recent measures taken by the RBI and the government to check volatility in the Rupee appears to have had only a limited impact. In this context, speculation is rife that the Government might institute further measures to check the fall in the Rupee. Technically, the Rupee is expected to trade ranged with support at 62.00 and resistance of 62.85.
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G-Sec:
Indian G-Sec continues to remain under pressure as the yield on the benchmark 7.16% bond due 2023 is trading at 8.91% levels as against previous close of 8.88%. Continued weakness in the Rupee has led to paring of bets of any further monetary easing by the RBI, thereby weighing on gilts. Meanwhile, in Friday's trade, Indian government bonds had declined amidst weak demand at the INR 160 bn auction, which also saw a devolvement to the tune of INR 14.44 bn. Going ahead, markets will track the movements in the Rupee for further cues.
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Oil:
Brent is trading slightly higher today morning as supply-related concerns persist amidst the political unrest in Egypt. WTI, however, is trading largely flat, widening its discount to Brent. Meanwhile, in Friday's session, oil prices gained, with Brent rising by close to 0.73%. WTI is currently trading at USD 107.4/bbl, unchanged from Friday's close. Brent is currently at USD 110.50/bbl vs. USD 110.40/bbl on Friday. Technically, Brent is expected to trade ranged between USD 108.5 -112.0/bbl.
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Gold:
Gold prices are trading higher today morning, extending previous session's gains. In Friday's session, gold prices gained amidst signs of improving investor demand after holdings in the SPDR Gold Trust recorded the first weekly gain in 2013. The recent losses in global equity markets have boosted the safe haven appeal of the yellow metal. Meanwhile, CFTC positioning data showed that bets on lower gold prices fell. Gold prices are currently hovering around USD 1381.0/oz compared to Friday's close of 1376.6/oz. Technically gold is expected to trade ranged between USD 1360-1400/oz.
Please find attached herewith a file containing the detailed analysis.
Regards,
ICICI Bank : Treasury Research
Contact:
Samir Tripathi:
(+91-22) 2653-7233
Pooja Sriram:
(+91-22) 2653-1414 (Extn: 2195)
Nikhil Gupta:
(+91-22) 2653-1414 (Extn: 2180)
Tadit Kundu:
(+91-22) 2653-1414 (Extn: 2087)
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