DAILY MARKET REPORT: MONDAY - January 14, 2013

The Indian Rupee opened at 54.74 levels after closing at 54.75 levels. The Intraday range for the rupee is seen between 54.60 - 55.00 levels.

The Indian rupee weakened after the factory output data that contracted and exports fell for the eighth straight month, highlighting the currency's vulnerability to a weak economy despite sustained capital inflows. The Indian Inflation data is due for the day, which will further decide the course of the RBI monetary policy on 29th January. The headline inflation probably edged up to 7.4 percent from 7.24 percent in November. The CPI, i.e. consumer price inflation data for December is also due for the day.

The trade deficit narrowed to $17.7 billion in December from $19.3 billion in November, but exports fell for an eighth straight month.

The Asian markets are trading positive on the back on weakening yen. The investors will be closely watching the Federal Reserve Chairman Ben Bernanke speech which is due for the day. Investors will be eagerly waiting for the clues on how long the Fed's latest bond purchase program will last. The Euro was seen souring high on the back of the ECB holding on to rates in the Euro zone. 

The US 10 year treasury yield is trading lower at 1.86%. The Indian federal bond yield closed lower at 7.88%. The Liquidity in the local markets eased last week on the back of government spending. Liquidity as measured by bids of repo in the LAF (Liquidity Adjustment Facility) auction of the RBI saw bids average at Rs 85,600 crores on a daily basis last week against an average of Rs 113,000 crores seen in the week before last. 

OUTLOOK: Exporters wait for 55 plus levels to cover. While the Importers should make the most of the dips coming in the market and cover their open exposures around 54.50 – 54.60 levels. OVERALL: USD/INR: Bullish

EURUSD: The Euro is trading higher at 1.3394 levels against the US dollar. The Euro is trading above its 10 month high against the US dollar taking cues from the optimistic comments by the ECB. The European leaders are commenting that the worst is over for the Euro crisis. In the meanwhile, Spain’s 10-year bonds advanced for a second week, pushing yields to as low as 4.84 percent Jan. 11, down from the July peak of 7.62 percent. This further supported the Euro.  Support is at 1.3175 and resistance is at 1.3560.

GBP/USD: The Pound is trading at 1.6146 levels against the US Dollar. The GBP weakened on the poor manufacturing data released on Friday which came at -0.3% v/s the forecasted of 0.5% and industrial production which came at 0.3% v/s the forecasted of 0.5%. The pair is expected to find a support near 1.6023 levels and the resistance is near 1.6256 levels. Overall in a range with bearish bias.

USDJPY: The Yen is trading lower at 89.54 levels. The Japanese Yen continues the weakening trend against the US dollar as the BOJ policy meeting comes nearer where the central bank is widely expected to raise their inflation target. It is also likely to add further stimulus measures. Recently, the newly elected Prime Minister said that the central bank must set the inflation target at 2%.  Support is at 86.85 and resistance is at 91.10.

 AUD/USD: Australian dollar is trading at 1.0549 levels against the US Dollar. The better than expected trade figures from China for the month of December surged the Australian Dollar. The exports data which surged to 14.1% from a year earlier was the biggest surprise for the markets. However, disappointing Australian housing and employment data restricted the gains in the AUD. Near term support is seen at 1.0500 levels while immediate resistance is at 1.0627 levels. 

Gold: Gold is trading at 1665 levels.  The support is near 1655 and resistance is near 1680.

Crude oil: The crude oil is trading at 94.16 levels. Support is near 92.80 and resistance is at 95.80 levels.

Dollar Index: The US dollar index is trading lower at 79.40 levels. The dollar index is trading below its three week low against the majors. It is driven down by the negative trade data and a strong recovery in the Euro. Last week, US posted its trade data, which showed that its trade deficit widened from $42.1B to -$48.7B, its highest level since April, 2012. This data signals a downward revision in the Q4 GDP. The comments from the voting members of the FOMC suggested that they are more in favour of ending the QE3 in this year. Today’s speech of the Fed chairman Ben Bernanke will be very significant in this case.  Support is near 78.99 and resistance is at 80.67 levels.

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