DAILY MARKET COMMENTARY: Tuesday - January 29, 2013

The Indian rupee opened at 53.96 levels after closing yesterday at 53.91 levels. It is expected to trade in the range of 53.80-54.20 levels.

The rupee depreciated yesterday posting its biggest single-day fall in three weeks, on the back of dollar buying by importers looking to meet their month-end demand. All the major Asian currencies were seen trading on a negative note against the US dollar.

A day before October-December policy announcement, the RBI released its monetary development report, where it revised India's GDP forecast to 5.5% in 2012-13 as against 5.7% estimated earlier. The central bank said, “Monetary policy needs to be adjusted in addressing growth risks as inflation remains above the Reserve Bank's comfort level and macroeconomic risks from twin deficits persist (fiscal and current account)”.

The hopes of a rate cut were dashed when the RBI said that the wide current account deficit may slow the pace of monetary easing.

The government continues to take measures to infuse more funds into the economy by some or the other ways. Other than attracting foreign flows, it has indulged into disinvestment to cut its fiscal deficit. As a part of the its Rs 30,000-crore disinvestment target for this fiscal, the government plans to divest 10 percent stake in Oil India which could fetch around Rs 2,700 crore. This will be followed by stake sale in NTPC in first week of Feb.

The global stock markets are trading mixed ahead of more U.S. economic reports and a Federal Reserve policy decision later in the week that may provide some clues to the Fed's stimulus plans.

The U.S. 10 year Treasury yields which affects many other borrowing rates, traded close to 2% yesterday. The investors are seen shifting to the equity market, indicating increased risk appetite in the market.  

Outlook: Exporters wait for initiating covers till we see significant recovery in US dollar till 54 levels at least. Importers should cover on dips as and when comfortable and keep stop loss of 54.10 on worst case in case unable to cover below 54.00 levels. There is a very strong support close to 53.20 levels which will be difficult to break. OVERALL: USD/INR pair still maintains bullish.

EUR/USD:    The Euro is trading firm at 1.3453 levels against the US dollar. Euro is expected to take cues from German and French consumer confidence numbers which are due to release today. Euro is expected to appreciate in near term. Euro zone has experienced net private inflows of €93bn in the last four months of 2012. In contrast, the first eight months had seen €406bn flow out of the five countries. This indicates a lot of money parked outside of the Euro zone is making its way back to the zone leading to the appreciation of the EUR/USD.  The near term support is at 1.3250 and resistance is at 1.3550.

GBP/USD: The British Pound fell to five months low against the US Dollar and eleven month low against Euro. The British Pound is trading at 1.5702 levels against the US dollar. The pound continues the get weaker as traders are dumping the currency on the fear of possibility that the Bank of England could ease monetary policy over next few months. With no economic data scheduled for today and tomorrow the downtrend in the currency is intact. The pair is expected to find a support near 1.5602 levels and the resistance is near 1.5893 levels. 

AUD/USD: Australian dollar is trading at 1.0443 levels against the US Dollar. The Australian Dollar recovered from yesterday’s level on account of positive economic data from Australia. The NAB Business confidence data which released today morning came in at 3 versus the -9, which signals the improving conditions in business. Australian Broadcasting corporation reports that Brisbane based ‘Linc Energy’ could be one of the single largest deposits of the oil in the world. The near term support is seen at 1.0388 levels while immediate resistance is at 1.0485 levels.

USD/JPY:  The Yen is trading at 90.79 levels. The Japanese Yen is witnessing a sharp depreciation  against the US dollar and technically after breaching 90 levels is expected to touch 95 levels. For further direction for the yen FOMC meeting minutes will be keenly observed as the Fed could give a hint on winding up its stimulus program hence pressuring the yen further. The near term support is seen at 88.00 and resistance is at 92.80.

Gold:  Gold is trading at $1659 levels. The gold prices are trading on a stable note, ahead of the important US data and the FOMC meet. Recently we saw Indian government raising the import duty on gold to 6% from 4% in order to curb imports of the precious metals so as to check the widening current account deficit. This led traders to buy more gold before the duty was announced and the imports have risen by 15 per cent to 75 tonne in January.  In fiscal year 2011-12, the country imported gold worth $56.5 billion, while in the first nine months of this fiscal year; imports are estimated at $38 billion.  The near term support is seen at $ 1645 levels whereas resistance is seen at $ 1672 levels.

Crude oil:   The crude oil is currently trading at 96.66 levels. Oil prices are expected to move upwards if the series of positive economic data continue. The near term support is at 95.50 and resistance is at 98.00 levels.

Dollar Index: The US Dollar Index is trading at 79.79 levels. The US dollar index is trading unchanged against the majors economic reports were mixed with orders for durable goods rising 4.6% in the month of December and pending home sales dropping to 4.3% last month.  This week US will be releasing its GDP figures for Q4 and NFP’s. The FOMC meeting minutes will be released on Wednesday. For the day, The S&P Case Shiller house price index is scheduled for release along with Consumer Confidence.  The Support is near 78.99 and resistance is at 80.67 levels.

(Source: Corporate Communications, India Forex Advisors Pvt Ltd)