DAILY MARKET REPORT: MONDAY - December 31, 2012

The Indian Rupee opened at 54.75 levels after closing at 54.76 levels on Friday. The Intraday range for the rupee is seen between 54.75 -54.90 levels.

The current account data for July-September will be released today with the  expectation that  it will show a record high deficit, sending the balance of payments into negative territory. The fiscal deficit and Infrastructure data for the month of November is also due for the day.

The macro-economic stability report released by RBI on Friday says that the Risks to India's macro-economic stability has increased on the back of an economic slowdown, high inflation, and ballooning fiscal and current account deficits. India's economy is expected to grow 5.7-5.9 percent for the fiscal year ending in March, the slowest since 2002/03.

The report showed a significant portion of foreign exchange exposures at companies remained un-hedged, posing another risk to macro-economic stability. The local currency is expected to remain volatile in the new year with some stability in the beginning.

The Asian stocks are trading lower with a deadline looming for the U.S. Congress to reach a budget agreement before the so-called fiscal cliff of automatic tax increases and spending cuts takes effect.

The efforts to strike a deal suffered a setback on Sunday as Senate leaders missed their own deadline to reach a compromise. Even if a last moment deal is reached on the fiscal cliff, it will do little to reduce the original problem of the deficit and the government debt limit, raising the prospect of further political in-fighting early in the new year.           

The US 10 year treasury yield is trading lower at 1.70%. The Indian 10 year bond yield closed flat at 8.11%.

Outlook: Exporters cover partially around 55 plus 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 1.3209 levels. The Euro is trading slightly lower against the US dollar, after the comments of the German chancellor Angela Markel.  She said that the sovereign debt crisis in the Euro zone is “far from over”, and that the economic environment will be more difficult in 2013. There were a number of measures taken during this year such as setup of the ESM which is helping the debt ridden nations like  Spain. Support is at 1.3120 levels, and the resistance is near 1.3310 levels.

GBP/USD: The Pound is trading at 1.6152 levels against the US Dollar. There was no news for the GBP this week with only low priority economic  data as many traders remained sidelined due to the holidays as well as uncertainty in the US. The pair is expected to find a support 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 85.97 levels. The yen continued to weaken against the US dollar amid speculation that the BOJ might further ease the monetary policy. The BOJ Governor Masaaki Shirakawa said the central bank and the government must work together to end deflation. The Yen has dropped by more than 10% against the US dollar in 2012.  Near term support is at 84.20 levels and the near term  resistance is at 88.08 levels. Target of 84-85 levels achieved and  further target it to 90 levels.

AUD/USD:  Australian dollar is trading  at 1.0395 levels. The Australian Dollar is trading stronger against the US Dollar after  China’s Manufacturing PMI rose to 51.5 in December well above the reading of 50.5 in November. Near term support is seen at 1.0290 levels while immediate resistance is at 1.0588 levels.

Gold: Gold is trading at $1660 levels. Near term support is at $1650 levels, whereas strong resistance can be seen near $1670 levels. Look for further dips to initiate buys.

Oil: WTI Crude is trading at $90.66 levels.  Support is at $88.20 levels, whereas strong resistance can be seen near the $93.60 level. Overall range bound.

DI: Dollar index is trading at 79.62 levels.  The US dollar is trading flat against its majors, as no concrete solution came out of the budget talks, held on the weekend. Both the leaders struggled to reach a last-minute deal that could protect the world's largest economy from a politically induced recession. The uncertainty over the fiscal cliff will continue to weigh on the stock markets across the world and the currencies.  Strong near term support seen near 78.90 levels and the resistance is at 80.20 levels. Overall the index is bullish.

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