DAILY MARKET REPORT: Thursday - December 20, 2012

The Indian Rupee opened at 54.67 levels after closing yesterday at 54.54 levels. The The Intraday range for the rupee is seen between 54.60 - 54.80 levels.

The gains in rupee were seen mainly on account of easy in buying pressure and the Euro hitting 7-1/2 month peak against the dollar helped by better-than-expected German business confidence data. The EUR was helped by the earlier Greek upgrade by S&P and news that the ECB would again accept Greek government bonds as collateral for its routine lending operations.

The Asian markets are trading lower as U.S. budget negotiations faltered. The talks to avert a U.S. fiscal crisis stalled - prompting worries of the world's largest economy sliding back into recession.

Obama and Boehner appear to have bridged their biggest ideological differences but remain hung up on the mix of tax hikes and spending cuts meant to narrow the budget gap. The White House issued a four page report detailing a list of objections to House Speaker Boehner’s plan. The disappointment was seen in the global market with riskier assets erasing its gains.

The White House wants taxes to rise on household incomes above $400,000 a year, a concession from Obama's opening proposal for a $250,000 income threshold while the Boehner wants tax for income above $10,00,000 a year.

The US 10 yr bonds were seen touching a 2 month high of 1.847% recently, currently trading at 1.79%. The Indian bond yields ended flat at 8.15%on Wednesday as the central bank said it would buy fewer bonds than it had previously, while long-end swap rates rose to three-week highs on continued disappointment over the lack of a rate cut. The central bank said it would buy up to 80 billion rupees of bonds on Friday

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 1.3219 levels. The Euro is trading on a flat note, despite a better than expected data from Germany. The ongoing US fiscal cliff talks turned out to be directionless, which restricted the up side in the Euro and equity markets globally.  The Euro had witnessed sharp gains earlier driven by increased optimism over Greece bailout. Support is at 1.3155 levels, and the resistance is near 1.3385 levels

GBP/USD:  The Pound is trading at 1.6253 levels.  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 84.23 levels. The yen is trading lower against the US dollar as BOJ is expected to increase its asset purchase program today at its monetary policy meeting. However, the Yen is trading quite flat taking cues from the US fiscal cliff talks which took a bad turn. 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: Australian dollar is trading at 1.0470 levels. The Australian dollar is trading below its one week low against the US dollar taking cues from the fiscal cliff issue in the US. The domestic and republican leaders are fighting over the same but are still not able to resolve it. This is making the riskier assets to erase their earlier gains.  Near term support is seen at 1.0390 levels while immediate resistance is at 1.0586 levels.

Gold: Gold is trading at $1668 levels.   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 $89.57 levels. The crude prices are trading above its two and a half week high after government data showed a jump in demand for diesel and heating oil. Also, the Inventories fell to a seasonally adjusted annual rate of -0.964M, from 0.843M in the preceding month. 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 79.35 levels.  The US dollar index which was drowning lower since last couple of weeks, has recovered slightly amid ongoing fiscal cliff talks. There is no progress over the solution of the crisis, as republican and democratic leaders are struggling to come to a decision. On the data front, U.S. home building permits touched their highest level in nearly 4-1/2 years in November, pointing to strength in the housing market.  Strong near term support seen near 78.90 levels and the resistance is at 79.70 levels. Overall the index is bullish.

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