DAILY MARKET REPORT: Friday - December 21, 2012

The Indian Rupee opened at 54.99 levels after closing yesterday at 54.85 levels. The Intra day range for the rupee is seen between 54.75-55.25 levels.

The Indian Parliament paved the way for corporate houses to enter the banking sector by approving the banking bill, a key reform legislation pending for long. Parliament also passed the amendments to the debt recovery laws.

The Banking Bill was approved by the Lower House earlier this week after the government dropped the controversial clause concerning allowing banks to trade in commodity futures.

The Asian markets are trading lower  after U.S. House Republican leaders canceled a planned vote on a budget proposal. Republicans in the U.S. Congress pushed a "fiscal cliff" plan that stands no chance of agreement and a shortage of time to reach a deal.

The positive data from US data including an upward revision to Q3 GDP and a steep recovery in the Dec Philly Fed manufacturing index supported the equity markets but failed to curb the concern among the global investors.

Major currencies were seen trading range bound as US fiscal negotiations effectively paused for the House vote on a bill the Senate leadership and the White House have promised to reject.

The investors so far have implicit the two sides will reach a deal, but concerns over the fiscal cliff have weighed on markets in recent weeks. The US lawmakers had hoped to wrap up work before the Christmas holiday, but Congressional leaders have kept the door open for last-minute votes before the New Year.

The US 10 year treasury yield traded lower as the risk aversion increases, it is currently trading 2 bps lower at 1.75%.

Outlook: Exporters cover partially around 55 levels, while Importers cover on dips around 54.55 - 54.60 levels who missed the levels of 54.10 - 54.20. Overall: USD/INR Bullish

EUR/USD: The EUR/USD is currently trading stronger at 1.3197 levels. The Euro has slightly weakened against the US dollar in volatile trading as worries over U.S. budget negotiations continue to persist. There was no major economic data released yesterday which could help Euro to erase the losses.   Support is at 1.3120 levels, and the resistance is near 1.3309 levels

GBP/USD: The Pound is trading at 1.6246 levels. The Minutes of the Bank of England Monetary Policy Meeting held yesterday showed that only one of the nine members favored an extension to the asset purchase program. The committee said that the growth prospects are flat in the near term, but that the inflation would remain  above 2% over the next year. The Pound traded higher against the Dollar despite weaker retail sales month on month basis. On the data front, we have Curent Account figures coming in today which are expected to be better than the previously reported numbers. Support is near 1.6105 levels and the resistance is near 1.6300 levels. Overall in a range with bearish bias.

USD/JPY: The yen is currently trading at 83.90 levels. The Japanese yen gained against the majors amid increased safe haven demand as further delay in resolving the fiscal cliff concerns threaten the recovery of the US economy. In the meanwhile, The Bank of Japan (8301) yesterday increased the asset-purchase fund to 76 trillion yen ($902 billion) from 66 trillion yen and kept its inflation target at 1 percent.  The outcome of the policy meeting was in line with the expectations. Near term support is at 82.50 levels and the near term resistance is at 85.50 levels. The yen is weakening towards 84-85 levels as expected.

AUD/USD: Australian dollar is trading at 1.0448 levels. The Aussie Dollar fell against the US Dollar as concerns over the talks to reach a deal on the US Budget stalled. Near term support is seen at 1.0390 levels while immediate resistance is at 1.0586 levels.

Gold: Gold is trading at $1640 levels. The gold prices are trading close to its four month low as the talks to avoid a fiscal crisis in the United States seemed to stall again. Near term support is at $1650 levels, whereas strong resistance can be seen near $1703 levels. Look for further dips to initiate buys.

Oil: WTI Crude is trading at $89.06 levels. The crude prices are trading below $90.00 as the uncertainties increase over the US fiscal cliff, as both the parties fail to arrive at a single solution. Support is at $87.75 levels, whereas strong resistance can be seen near the $90.30 level. Overall range bound.

DI: Dollar index is trading lower lower at 79.46 levels.  The dollar index has recovered against its majors supported by positive economic reports released yesterday and the risk aversion in the market. The reports showed U.S. economy expanded 3.1% in Q3, compared to a previous forecast of 2.7%. The Jobless claims increased to 361K from 344K, which was right in line with expectations.   Existing home sales jumped 5.9%, topping 5 million for the first time in 3 years. Manufacturing conditions in the US improved as the latest report showed that the index rose from -10.7 to +8.1, its highest level in 8 months. So, overall it was a very good day for US data. However, fiscal cliff continues to be in the limelight as the talks take a poor turn. Strong near term support seen near 78.90 levels and the resistance is at 79.70 levels. Overall the index is bullish.

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