• New Year rally fades;  range trading likely ahead of Friday's NFP The risk-on momentum that rang in the New Year dissipated on Wednesday despite the higher revision of the eurozone Services PMI. In fact, EUR remains weighed down on the crosses with EURAUD falling to new record lows and EURJPY nearing 12-year lows as it firmly trades below 100.00. While the German EUR5bn 10yr bund auction on Wednesday was a success vs. November's failed auction, the focus today will be on the large supply of longer-dated bonds from France. Market jitters over France loom large with the threat of S&P following through on a potential downgrade after putting France on negative watch on 5 December, potentially stripping the second largest eurozone country of its triple-A status in the coming weeks. Thus, we reiterate our bearish view on EUR in the medium term as several obstacles for the eurozone lie ahead. Headlines on Greece have started to re-emerge with Prime Minister Papademos saying that Greece faces default in March if a Troika deal does not come through. The same tune was struck by the IMF in an article in the Wall Street Journal the day before wherein an IMF official was quoted as saying that “the debt sustainability analysis is not valid anymore" under the new economic forecasts and for Greece's debt to be sustainable now "requires either a deeper haircut or additional loans from Europe”.  While we expect EUR to remain vulnerable to further weakness particularly on the crosses, we expect markets to trade sideways heading into Friday's NFP number.
• Australian trade balance and UK Services PMI due out later today Early this morning, the Australian trade balance is expected to improve slightly. With Asia ex-Japan as Australia's key trading bloc, the resilience of the Australian trade balance provides some insight on how these economies are performing which should help keep AUD supported, barring a massive risk-off move. Also, a persistent rise in oil prices as seen on Wednesday (as a result of geopolitical risk and despite the USD strength), may eventually drag AUD, CAD, and NOK higher given their historically strong correlation to oil.   Meanwhile, UK construction and manufacturing PMI over the past two days have surprised to the upside, and this streak may be broken today as we expect UK Services PMI to decline to 50.5 from 52.1. With the services sector comprising the largest component of the UK economy, GBP is vulnerable to downside risk most likely against USD. EURGBP should push lower as suggested by the relationship between EURGBP and EU-UK 2 year swap spread (chart below). We expect EURGBP to decline to 0.8000 by the end of Q1.
• ISM Non-manufacturing, ADP, and Initial Claims on the calendar today The trend in improving US data is likely to resume later today. ISM non-manufacturing is likely to improve from the previous month as is initial jobless claims. However, ADP numbers are likely to moderate in December vs. November, and we expect ADP to come in weaker than consensus (150k vs. 178k). But, ADP has been a poor indicator of NFP, and the employment component of the ISM non-manufacturing index will be much more important as it is a better indicator for Friday's NFP. The employment index of the ISM manufacturing survey improved significantly in December vs. November. If this is any indication of the ISM non-manufacturing index, then market expectations for NFP which is currently at +150k will likely be revised higher

USD-INR JAN 2012 MCX-SX FUTURE:- Yesterday it opened at 53.45 & made the high of the day  at 53.4875. It had then fallen to 53.22 to mark as low of the day & finally closed at 53.27. For the day we see initial support at 53.20-53.25 & resistance at 53.35-53.40 & this is likely to be trading range of the day. Breach of the support at 53.20 may lead to retest of 52.95-53.00. Swing trader should go long around  53.00  with the stop of 52.90 for the target of 53.15 & above. Kindly reduce the quantum of lot as stoploss used are wide due to volatility. Remember traders discretion & judgment of price behavior during the entry of trade  is vital for profitability of trade  & this can be done at that moment of time only.

EURO-USD:- Yesterday it opened at 1.3048 & made the high of 1.3073. It had then fallen to 1.2898 to mark as the low of the day & finally closed at 1.2940. For the day we see initial support at 1.2850-1.2870 & resistance at 1.2950-1.2970.The breach 1.2850 will lead to retest of the 1.2685-1.2935.   Swing trader should go short on breach of  1.2850  with the stop of 1.2875 for the target of  1.2685 . Traders discretion & judgment of price rally top/price decline bottom while entering trade,  is vital for profitability of trade  & this can be done at that moment of time only. 

EURO-INR JAN 2012 MCX-SX FUTURE :-  Yesterday it opened at 69.65 & made the high of the day at 69.785. It then fell to 69.1350 to mark as low of the day & finally closed at 69.3050. For the day we see initial support at 68.40-68.50 & resistance at 68.80-68.90 .The breach of 68.40 will lead to retest of 67.70-67.80.   In our view aggressive  swing trader should go short on breach of   68.40  with the stop of 68.60  for the target of 67.80 . Once the trade runs in profit trail the stop suitably for exit so that profit is compounded & any higher target can also be taken advantage of it.

GBPINR JAN 2012 MCX FUTURE :- For the day we see initial support at 82.50-82.60 & resistance at 82.90-83.00 and breach of 82.50 will lead to retest of 81.80-81.90  In our view traders should go short around  82.85 with the stop of 83.00 for the target of 81.80-81-90 .                   

JPYINR JAN 2012 MCX FUTURE :-   For the day we see  support at 68.80-68.90 & resistance at 69.80-90.   In our view traders should go short near 69.60   with the stop of 69.80  for the target range of  69.70-69.80  and higher.

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