DAILY MARKET REPORT: Wednesday - December 19, 2012

The Indian Rupee opened at 54.90 levels after closing yesterday at 54.84 levels. The Intraday range for the rupee is seen between 54.65 - 54.95 levels.

The Lok Sabha cleared a path for more foreign investment in the banking sector by approving a bill to increase shareholders' voting rights, after dropping a controversial clause allowing banks to trade in commodity futures.

The parliament will not vote on a long-awaited insurance bill aimed at raising the foreign investment cap to 49% from 26% in the industry. The parliamentary winter session ends on Thursday.

The Asian equity markets are trading higher and the Euro rose above 1.32 levels, seven months highs as signs of progress in resolving the U.S. "fiscal cliff" which boosted the demand for riskier assets.

House Republican Leader Boehner announced that he is preparing a back-up to extend current tax rates for all Americans except millionaires in case talks fail. Despite the ongoing to-and-fro differences between the House Leadership and the White House have narrowed considerably in recent days and hopes for a deal are improving.

If the deal is done and politicians come to an agreement at the 11th hour, we can expect a huge relief rally in the Forex market that would involve significant losses in the U.S. dollar and Japanese Yen.  If they failed to come to an agreement and politicians let the U.S. fall off the cliff then the gains enjoyed  could fade quickly.

The Euro gained additional momentum after Standard & Poor's upgraded Greece's sovereign debt rating by a whopping 6 notches to B- with a stable outlook from Selective Default.

The US 10 year treasury yield is trading higher at 1.80 bps supporting risk appetite. The Indian bond yields ended higher at 8.15% after rising to 8.18% after the central bank kept key policy rates and the cash reserve ratio unchanged, but the rise was capped as the Reserve Bank of India said it would shift its focus to growth, reinforcing expectations of easing as early as January.

Outlook:  Exporters start covering partially around 54.80 levels .Importers were asked to cover close to 54.00 (Plan A)  and also use strict stop loss of 54.55-60 (Plan B) to cover the unhedged exposures. Overall USD INR bullish. Target 55.00 achieved

EUR/USD: The EUR/USD is currently trading stronger at 1.3237 levels. The Euro is trading above its seven month high against the US dollar amid increased optimism that US will be able to resolve its ongoing fiscal cliff issue. Along with this, the rating upgrade of Greece by Standard & Poor’s supported the Euro.  Standard & Poor's upgraded Greece's sovereign debt rating by a whopping 6 notches to B- with a stable outlook from Selective Default. All the events seem to be in favour of the Euro taking it higher above $1.3200 levels.  The German business climate is scheduled to release today. Support is at 1.3150 levels, and the resistance is near 1.3380 levels.       

GBP/USD:  The Pound is trading at 1.6260 levels. The Consumer Price Inflation released yesterday for the month of November came in better than expected at 2.7% v/s 2.6% forecasted which supported the Pound. The currency is also supported by the increased risk appetite in the market. The monetary policy meeting minutes will be released today.  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 84.28 levels. The Yen continues to fall against the US dollar and its other major peers taking cues from the victory of the LDP leader, increased risk appetite and sharp gains in the Euro and GBP. The Bank of Japan will be starting its 2 day monetary policy meeting, and there are high expectations that they will ease the monetary policy. Yesterday’s trade data will provide further support to the central bank to add more stimulus. Japan reported  its fifth straight month of trade deficits for November.  November exports stood at 4.98 trillion yen ($59.3 billion), while imports totalled 5.94 trillion yen ($70.7 billion), making for a deficit of 953.4 billion yen ($11.4 billion). 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 1.0514 levels. The Aussie Dollar fell against the US Dollar amid expectations that the RBA might cut the rate further as the mining sector of the economy seems to be underperforming. The RBA said the economic growth in Australia would be slower which has dampened the confidence towards Australian Dollars. Near term support is seen at 1.0450 levels while immediate resistance is at 1.0624 levels.

Gold: Gold is trading at $1675 levels.  The Gold is trading below its three month low as progress in the US fiscal cliff talks dampened its safe haven appeal.  S 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 $88.35 levels.  The crude prices are trading higher near its two weeks high led by increased hopes that the US fiscal cliff will be resolved before the year end. The crude was  also trading higher after the report showed the US crude inventories declined the most in more than three months. Support is at $85.20 levels, whereas strong resistance can be seen near the $90.30 level. Overall range bound.

DI: Dollar index is trading lower lower at  79.25 levels.  The US dollar is struggling against the majors and trading below 80.00 levels.   The dollar index is hit by the progress over the US fiscal cliff issue, which sparked the risk appetite among theinvestors. There are expectations  that both political parties in the US are moving closer to an agreement on ways to avert the upcoming package of tax increases and spending cuts. 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.)