DAILY MARKET REPORT: Wednesday - January 9, 2013

The Indian Rupee opened at 55.00 levels after closing yesterday at 54.99 levels. The Intraday range for the rupee is seen between 54.85 - 55.30 levels.

The Fitch Ratings retains its "negative" outlook on India's sovereign credit rating, citing concerns about slowing economic growth, persistent inflationary pressures and an uncertain fiscal outlook.

Another rating agency Standard & Poor's had also said last month that India faces a one-in-three chance of rating downgrade in the next two years in case the government fails to push reforms in view of the political gridlock and ensuing general election in 2014

The Finance Ministry reacted by stating that they are not worried about the threat of ratings downgrade by global agencies like Fitch as it is moving on the right track and will restrict fiscal deficit to 5.3%of the GDP in 2012-13. The government has already raised the fiscal deficit target to a more acceptable level of 5.3% of Gross Domestic Product as against 5.1% estimated earlier.

The Asian markets are trading positive as the investors wait for corporate earnings season to start. The Euro is seen trading steady against the dollar in the absence of any major news and no significant economic data. The Euro is expected to be in a range ahead of the European Central Bank policy meeting on Thursday and Spanish and Italian bond auctions toward the end of the week.

Since the main focus for this week will be the speeches from Fed officials which will be followed by FOMC meet on 25th January. The markets will be maintaining a keen eye on the hints provided by the FED members in their speech.

The US 10 year Treasury yield is trading lower at 1.87%. The Indian Federal bond yield closed 1 bp higher at 7.91%.

Outlook: Importers were asked to cover at 54.20 - 54.40 levels, who missed the levels should cover on dips around54.70 - 54.80 levels. The Exporters should wait for better levels to sell, as we have already covered partially around 55 plus levels. Overall view: USDINR Bullish

EURUSD: The Euro is currently trading at 1.3075 levels. It was a very busy day for the Euro zone as mixed economic releases yesterday gave no clue for the European markets. The trade balance figures for Germany came out at Euro 14.6B v/s the forecasted figures of Euro 15.4B  whereas the trade balance figures for France came in better than the forecasted. Germany factory orders also showed a negative sign. The unemployment rate of the Euro zone  came steady at 11.8% as forecasted. Support is seen at 1.2950 levels while resistance is seen at 1.3119 levels.

GBPUSD: The Pound is trading  at 1.6047 levels against the US Dollar. The Pound gave up its gain against the greenback on account of a slowdown in annualized retail sales growth last month. According to British Retail Consortium the retail sales for the month of December came at 0.3% v/s 0.4 last year, a clear sign of spending fall. The pair is expected to find a support near 1.6023 levels and the resistance is near 1.6115 levels. Overall in a range with bearish bias.

USD/JPY:  The Yen is trading slightly stronger  at 87.43  against the US Dollar. After posting modest gains in the last couple of sessions, the Yen has once again started weakening against the US dollar. The Finance Minister of Japan said that they plan to weaken the Yen by using its Forex reserves to buy bonds issued by the European Stability Mechanism (ESM).  Most important event in this month will be the BOJ's next meeting on January 21-22, when policymakers will debate raising its inflation target to 2 percent from the current 1 percent. Near term support is at86.50 levels and the near term resistance is at 89.00 levels. Target of 84-85 levels achieved and  further target it to 90 levels.

AUD/USD:  Australian dollar is trading  weaker at 1.0498 levels against the US Dollar. The AUD is trading flat, after falling slightly against the US dollar on account of weak economic data. The retail sales came out at -0.1% versus 0.3% expected, and this is the worst monthly reading since May 2012. The fall in the retail sales was attributed to  household goods which declined by 0.9% followed by clothing which fell by 0.6%. Other than this, Chinese trade figures are scheduled for release this week, which will be significant for the AUD.  The Near term support is seen at 1.0290 levels while immediate resistance is at 1.0588 levels.

Gold: The gold is trading at $1658 level.  The pair is expected to find support at $1640 levels and resistance at $1675levels.

Oil: The WTI Crude is trading at $93.19 levels.    The pair is expected to find support at $89.95 levels and resistance at $93.75 levels. Overall range bound.

DI: The Dollar is trading above its one month  high at 80.42 levels. The US dollar index has rebounded once again against the majors, after  asset of weak economic data was released from the Euro zone. The unemployment rate of EU remained elevated, the German trade balance and retail sales came out weaker than expected which made Euro to fall  below 1.3100 against the US dollar. The weak data from Europe has revived speculation that an upcoming European Central Bank (ECB) meeting on Thursday could result in more stimulus, further weakening the currency. Strong near term support is seen at 79.60 levels and the resistance is seen at 81.45 levels. Overall the Dollar Index is bullish. 

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