DAILY MARKET REPORT: Wednesday - January 23, 2013

The Indian Rupee opened at 53.63 levels after closing at 53.81 levels yesterday. The Intraday range for the rupee is expected between 53.55 – 53.90 levels.

The rupee was earlier seen gaining strength after the government decided to raise the import duty on gold from 4% to 6%. This step is aimed at reducing the country’s widening current account deficit which has been a major worry for foreign investors. Looking at the figures, on a daily basis India’s gold related dollar demand comes to around $150-$170 million.

The increasing range of upper middle class and a huge consumption demand is seen attracting the International brands. The leading international brands IKEA will be setting up its branches soon in India, as the proposal has been cleared by India’s foreign investment board.

Yesterday, India’s Finance Minister said the growth next year should be in the upper ranges of the 6%-7% target and that the economy should return to its potential growth rate, around 8%, by the following year. He was in Hong Kong to meet investors ahead of the budget presentation for fiscal 2013. The FM is seen convincing the global investors to get the flows back to the nation which could support to reduce the current account deficit.

The Asian stock markets are trading mixed after the Republican proposal to extend the government’s debt ceiling for three months. The proposed bill is expected to include a term that says that if either chamber of Congress does not pass a budget by April 15th, "pay for members of the chamber that doesn't act will be withheld and placed in an escrow account."

In spite of positive data, the euro received very little support from the sharp improvement in German investor confidence. This was the second month in a row that German sentiment improved considerably suggesting that growth in Europe's biggest economy may be reviving. However, the ZEW survey which is a poll mainly of investment professionals tends to be skewed by financial market performance and the upcoming IFO report which deals with the business sector should be a more accurate gage of economic activity. 

The US 10 year treasury yields inched lower from 1.88% to 1.84%. The Indian 10 year bond yields closed down 1 bps at 7.85%.

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. There is a very strong support close to 53.20 levels which will be difficult to break. OVERALL: USD/INR pair still maintains bullish but since rupee is slightly strong in short term on local news hence one should buy the pair on dips.

 EUR/USD:  The Euro is trading lower at 1.3317 levels against the US dollar.  Euro was seen to be hovering in a range-bound manner. After yesterday’s volatile day, euro was trapped between two announcements. Firstly, the announcement by the Euro-area finance ministers when they approved the payout of 9.2 billion euro’s ($12.3 billion) to Greece this month and secondly the German economic sentiment survey which showed the index turned out to be much better than expected. Support is at 1.3240 and resistance is at 1.3495.

GBP/USD: The Pound is trading weaker at 1.5827 levels against the US Dollar on account of weak economic data released yesterday. Firstly, the public sector borrowing continue to disappoint with its figures which came at pound 13.2bn against the forecasted of pound 13.4bn. Secondly, the CBI industrial orders also went for a toss in the month of January reflecting weakness in the export sector. The pair is expected to find a support near 1.5799 levels and the resistance is near 1.5893 levels. 

USD/JPY:  The Yen is trading at 88.66 levels. The Japanese yen appreciated versus all of its 16 major counterparts. It strengthened by 0.2 percent to 88.53 per dollar after climbing 1 percent yesterday to 88.71, the biggest advance since May. Markets were expecting from the BOJ to implement its bolder action of conducting open-ended asset purchases sooner and found lack of deadline set for the inflation target.  However, going forward, the yen should depreciate. The near term support is seen at 86.85 and resistance is at 91.10.

AUD/USD: Australian dollar is trading weaker at 1.0533 levels against the US Dollar. The Consumer price index which released today came in at 0.2% against the forecasted of 0.4% which shows the inflationary pressures have eased in the fourth quarter. The near term support is seen at 1.0508 levels while immediate resistance is at 1.0627 levels. 

Gold: Gold Prices in Dollars hovered above $1693 per ounce.  Germany’s central bank, the Bundesbank, last week announced that it will take measures to bring gold reserves within their borders held overseas back to the homeland. Germany holds more than 3,000 tons of gold bullion, which represents more than 75% of its foreign currency reserves. This news has sent ripples throughout the markets. The near term support is seen at $1685 levels whereas resistance is seen at $1698 levels.

Crude oil:  The crude is currently trading at 95.45 levels. Oil traded at the highest price in four months in near term after German investor confidence jumped and US, the world’s largest crude consumer gearing up to vote on lifting the debt limit. Support is near 92.80 and resistance is at 97.60 levels.

Dollar Index: The US Dollar Index is trading at 79.87 levels. The US Dollar Index is trading today in a very thin range on account of worst than forecasted home sales which came in at 4.94m v/s the forecasted of 5.09m. Adding to it, the German ZEW economic sentiment data released yesterday came at positive 31.5 v/s the forecasted of 12.2 which supported the Euro to sustain above the 1.3300 levels.  There will be a voting on debt ceiling in House of Parliament. The republicans will be trying to get extension of four months. Support is near 78.99 and resistance is at 80.67 levels.

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