DAILY MARKET REPORT: Monday - January 21, 2013.

The Indian Rupee opened at 53.72 levels after closing at 53.71 levels on Friday. The Intraday range for the rupee is expected between 53.55-53.85 levels.

The rupee is currently trading above its two week high against the US dollar taking cues from the last week’s news regarding diesel price deregulation by the government. However, the market was more worried about the central bank chief's recent comments on inflation and how it would influence the rate decision on January 29.

Recently, RBI opened a special window to provide exporters with dollar credit by allowing banks to borrow the US dollars from the central bank under a swap facility.  This facility will be available to scheduled banks (excluding RRBs) from January 21, 2013 till June 28, 2013 for fixed tenor of 3/6 months.

The recent Chinese GDP figures supported the positive sentiments in the markets. Chinese economy grew by 7.9% in the fourth quarter, rebounded after seven straight quarters of slowdown. 

This week will be very important for us to watch as number of data and events are lined up. The Euro group meeting will be held today in Brussels.  The US House of Representatives will be voting on the raising of the debt ceiling on Wednesday. The BOJ will be holding a two day monetary policy meeting, starting from today.

The US 10 year Treasury yield is trading lower at 1.84%. The Indian Federal bond yield closed at 7.86%.

OUTLOOK: Exporters wait for initiating covers since the rupee has slid over 3 percent in the recent days. 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. OVERALL: USD/INR PAIR: STILL BULLISH with short term dips.

EURUSD: The Euro is trading lower at 1.3319 levels against the US dollar. At a meeting in Brussels today, there will be an assessment of Spain, Cyprus and Greece and euro-area ministers. For euro-zone Spain is a cause of concern as the data shows the burden on economic output that may have kept as many as 6 million people out of work. Trade figures and house price data of Spain is awaited ahead.  The gains in Euro will be limited amid risk aversion in the market.   Support is at 1.3240 and resistance is at 1.3495.

GBP/USD:  The Pound is trading weaker at 1.5867 levels against the US Dollar. The pound is trading below its one month low against the US dollar. The economy is facing a threat as the investors are showing more confidence in the Euro area. The data from the UK increased the nervousness among the investors. The retail sales dropped and the inflation rate was held at the highest rate. The U.K. is rated AAA with negative outlook by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings. The pair is expected to find a support near 1.5820 levels and the resistance is near 1.6180 levels.

USDJPY: The Yen is trading at 89.54 levels.  The yen is trading lower against the US dollar ahead of the BOJ meeting. The central bank is expected to ease the monetary policy and raise the inflation target to 2%.  Support is at 86.85 and resistance is at 91.10.

AUD/USD: Australian dollar is trading at 1.0516 levels against the US Dollar. The employment data released last week came in negative while unemployment figures came in as forecasted which failed to support the Australian Dollar. Near term support is seen at 1.0396 levels while immediate resistance is at 1.0597 levels.

Gold: The Gold is trading at $1689 levels. The gold is trading higher ahead of the US debt ceiling negotiations which will take place on coming Wednesday. The near term support is seen at $1675 levels whereas resistance is seen at $1695 levels.

Crude oil: The crude is currently trading at 95.71 levels. The crude oil prices are trading higher taking cues from the positive data from US and China in the last week. The recent jump in the Chinese GDP figures boosted the demand for oil.   Support is near 92.80 and resistance is at 97.60 levels.

Dollar Index: The US dollar index has recovered modestly and trading at 79.97 levels.    The dollar index is trading slightly lower after the consumer sentiment index unexpectedly fell to 71.3 in January from December’s 72.9. However the risk aversion is likely to restrict the downside in the dollar index. The investors will be very cautious ahead of the BOJ policy meeting and the Euro group meetings which will be held today. The US banks will be closed today in the observance of Martin Luther King day. Support is near 78.99 and resistance is at 80.67 levels.

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