WEEKLY CURRENCY OUTLOOK(09-01-2012 TO 13-01-2012)
Strong employment report fails to turn poor market sentiment
A strong US employment report failed to pick up market sentiment with US equities closing in the red and USD on firm
footing. Non-farm payrolls beat expectations rising 200k (vs. consensus 155k) in December after a downwardly revised
100k gain in November. The unemployment rate also declined to 8.5% from 8.7%; the revisions reflected a re-estimation of
Seasonal factors rather than new data. Overall, the 3-month average gain in NFP of 137k is probably a reasonable gauge of
Underlying trends and this is enough to generate moderate nominal income growth to consumers. Also, aggregate hours
Worked is growing 3% at a 3-month annualised rate and average hourly earnings are rising 1.9% on the same basis. Our
Economists continue to expect some slowing in consumer spending with headline inflation moderating which should keep
The economy in moderate growth territory. While US employment was strong, CAD underperformed against all G10 FX on
The day. The weaker CAD is likely the result of the poor performance of the Canadian December employment report which
Was released on Friday. The net change in employment may have risen 17.5k, but 25.5k full time jobs were lost, and the
Unemployment rate rose to 7.5% from 7.4%. In Q4, the economy shed a total of 55.1k jobs reflecting a broad-based loss of
Momentum in the Canadian economy. Our economists believe that this report combined with easy policy from the Fed is
Likely to tilt the BoC towards easing in the coming months; this should weigh negatively on CAD particularly against USD.
Eurozone remains focal point of the market with Sarkozy/Merkel meeting Monday and ECB meeting Thursday
Failure to rally after a solid US employment report indicates that the market remains concerned over the Eurozone
sovereign debt crisis. The Wall Street Journal reported that the ECB bought Italian and Spanish debt as Italian 10yr yields
once again surpassed 7%. Despite the ECB buying, Italian yields closed above 7% on Friday. German Chancellor Merkel
and French President Sarkozy are set to meet Monday to prepare for the EU leaders meeting on 30 January. As such, the
quiet run on the European headline front may come to an end. Thus, EUR especially on the crosses is likely to remain
heavy especially with the potential headline risk. Also, German industrial production is likely to verify the weakness of the
economy; we expect a decline of -0.3%m/m. Headlines and data aside, the key event for the EUR this week will be the ECB
meeting on 12 January. While the ECB is expected to maintain rates at 1.00%, comments from ECB President Draghi will
once again be watched for policy directional clues which could result in some market disappointment. While EURUSD
continues to dip lower, EUR crosses are likely to remain heavy, especially EURGBP.
China data will be crucial for commodity currencies
China data this week will be crucial for commodity currencies. The usual monthly barrage of data will be released
throughout the week, kicking off with the trade data. The jump in the December Chinese PMI continues to suggest a soft
landing as we expect, providing some support for commodity currencies. The consistent improvement in the China data
should phase out any notion by the markets of a hard landing. Thus, robust data out of China will lend support to AUD, likely
driving EURAUD lower since AUDUSD will remain dependent on overall risk appetite.USD-INR JAN 2012 MCX-SX FUTURE :-Last week USD/INR opened at 53.65 & went up on the opening day to 53.69 to mark the high of the week. It then kept on declining till 52.8550 to register the low of the week & finally closed at 52.9450.For the week we see initial support at 52.60-52.70 & initial resistance at 53.25-53.35. The breach of support at 52.60 may lead to 52.13-52.33.Our bias is negative & we see more probability of it moving south but we expect a bounce in the initial part of the week. However global currency market is likely to exhibit heightened volatility& in this dynamic environment, it will be prudent to take this as rough skeleton & we will refine as well as retune final target with the additional data on daily basis. Swing trader should go short on any rally to around 53.20 with the stop of 53.35 or on breach of 52.85 for the initial target of 52.60 & 52.13.Once the trade runs in profit please trail the stop to lock in the profit. Remember trader’s discretion & judgment of price top formation while entering the trade isvital for profitability of trade & this can be done at that moment of time only.
EURO-USD:-Last week EUR/USD opened at 1.2930 & went up to register the high of 1.3077. It then moved down to register the low of week at 1.2693 & finally closed at 1.2721.For the coming week we see 1.2660-1.2680 as initial support zone & 1.2800-1.2820 as initial resistance. Breach of 1.2660 will lead to head towards 1.2525-1.2550. Swing traders should go short around 1.2780 with the stop of 1.2840 for the target of 1.2660 & 1.2525 However traders must guard themselves against volatile movements generated by the many events scheduled on next week.Remember trader’s discretion & judgment of price bottom formation while entering the trade is vital for profitability of trade & this can be done at that moment of time only.
EURO-INR JAN 2012 MCX-SXFUTURE:-Last week it opened at 69.355 & made the high of 69.9825 on the second day of week. It then kept on declining to mark the low at 67.6825 & finally closed at 67.7125.With the depreciating EURO & appreciating INR, it will face double whammy effect on downside & expect it to open the week with gap down. For the coming week we see 67.80-68.00 as resistance & 66.40-66.60 as support. In our view aggressive swing trader should go short around 67.75 with the stop of 68.00 for the target of 66.40 & 65.00.Once the trade runs in profit trail the stop suitably for exit so that profit is compounded. Remember traders discretion & judgment of price behaviour while entering the trade is vital for right direction & this can be done at that moment of time only.
GBP-USD: -Last week it opened at 1.5525 & went up to 1.5670 to mark the high of week. It then kept on declining for the rest of the week till 1.5371 to register the low of week & finally closed at 1.5435. For the week we see 1.5500-1.5525 as resistance & 1.5350-1.5375 as support. Breach of support at 1.5350 will lead to test the support zones at 1.5240-15260 & 1.5150-1.5175. In our view aggressive swing trader should go short on any rally towards 1.5500 with the stop of 1.5525 for the target of 1.5350,1.5240 & lower.
GBP-INR JAN 2012 MCX-SX FUTURE :-Last week it opened at 82.75550 & went up to register the high of the week at 83.80. It then relentlessly kept on declining to mark the low of the week at 81.9875 & finally closed at 82.03. With the depreciating GBP & appreciating INR, it will face double whammy effect on downside & expect it to open the week with gap down. We are of the view that it has good support at 80.60-80.80 & resistance at 81.60-81.80.Breach of 80.60 will lead to head for the 79.80-80.00 support zone. In our view aggressive swing trader should go short on any rally towards 81.50 with the stop of 81.80 for the target of 80.60 &80.00. Once the trade runs in profit trail the stop suitably for exit so that profit is compounded . Remember trader’s discretion & judgment of price behaviour while entering the trade is vital for right direction & this can be done at that moment of time only.
USD-JPY:-Last week it opened at 76.9650 & declined to mark the low at 76.56.It then rose to mark the high of week at 77.350 & finally closed at 76.9590.For the coming week we see 77.30-77.40 as resistance & 75.90-76.00 as support. In our view aggressive swing trader should go short on any rally towards 77.20 with the stop of 77.30 for the target of 76.00 & lower. Once the trade runs in profit trail the stop suitably for exit so that profit is compounded . Remember trader’s discretion & judgment of price behaviour while entering the trade is vital for right direction & this can be done at that moment of time only.
JPY-INR JAN 2012 MCX-SX FUTURE:-Last week it opened at 69.31 & within moments made the high of 69.8225 for the week. It then kept on declining to mark the low of the week at 68.58 & finally closed at 68.6375.In our view there is good support at 68.50-68.70 & resistance at 70.70-70.50.Ideally we expect one more high above 70.00 but this being terminal move may not materialize. In our view aggressive swing trader should go short around 70.40 with the stop of 70.70 or on breach of 68.50 for the target of 67.50.
DOLLAR INDEX:-Last week it opened at 80.155 & went down to 79.83 to mark the low of the week. It then rose to 81.72 to mark the high of the week & finally closed at 80.522.In our view normally it should find resistance at 81.80-81.90 & support at 80.40-80.50.
PIVOT POINT TABLE
| Index/Stock | S3 | S2 | S1 | Pivot | R1 | R2 | R3 |
| USDINR | 51.8017 | 52.3283 | 52.6367 | 53.1633 | 53.4717 | 53.9983 | 54.3067 |
| EUR | 1.2200 | 1.2446 | 1.2584 | 1.2830 | 1.2968 | 1.3214 | 1.3352 |
| EURINR | 64.6358 | 66.1592 | 66.9358 | 68.4592 | 69.2358 | 70.7592 | 71.5358 |
| GBP | 1.5015 | 1.5193 | 1.5314 | 1.5492 | 1.5613 | 1.5791 | 1.5912 |
| GBPINR | 79.5992 | 80.7933 | 81.4117 | 82.6058 | 83.2242 | 84.4183 | 85.0367 |
| JPY | 75.7927 | 76.1763 | 76.5677 | 76.9513 | 77.3427 | 77.7263 | 78.1177 |
| JPYINR | 66.9617 | 67.7708 | 68.2042 | 69.0133 | 69.4467 | 70.2558 | 70.6892 |
| DOLLAR INDEX | 78.5033 | 79.1667 | 80.3933 | 81.0567 | 82.2833 | 82.9467 | 84.1733 |
ECONOMIC CALENDER
| country | date | name | consensus | previous | volatility |
| China | 20120110 05:30:00 | Trade Balance | 8.70B | 17.03B | 2 |
| China | 20120111 05:30:00 | M2 Money Supply (YoY) | 12.60% | 12.70% | 1 |
| China | 20120113 05:30:00 | Industrial Production (YoY) | 12.20% | 13.20% | 2 |
| China | 20120113 05:30:00 | Retail Sales (YoY) | 17.10% | 17.20% | 2 |
| European Monetary Union | 20120109 15:00:00 | Sentix Investor Confidence | -21.3 | -24 | 2 |
| European Monetary Union | 20120112 15:30:00 | Industrial Production s.a. (MoM) | -0.20% | -0.10% | 1 |
| European Monetary Union | 20120112 15:30:00 | Industrial Production w.d.a. (YoY) | 0.30% | 1.30% | 2 |
| European Monetary Union | 20120112 18:15:00 | ECB Interest Rate Decision |
| 1% | 3 |
| European Monetary Union | 20120112 19:00:00 | ECB President Draghi's Speech |
|
| 3 |
| European Monetary Union | 20120113 15:30:00 | Trade Balance n.s.a. |
| €1.1B | 2 |
| European Monetary Union | 20120113 15:30:00 | Trade Balance s.a. |
| €0.3B | 2 |
| India | 20120111 13:00:00 | M3 Money Supply |
| 16.50% | 1 |
| India | 20120112 11:00:00 | Cumulative Industrial Output |
| 3.50% | 1 |
| India | 20120112 11:00:00 | Industrial Output |
| -5.10% | 1 |
| India | 20120112 11:00:00 | Manufacturing Output |
| -6% | 1 |
| India | 20120113 17:00:00 | Bank Loan Growth |
| 17.10% | 1 |
| India | 20120113 17:00:00 | FX Reserves, USD |
| $296.688B | 1 |
| Japan | 20120109 05:30:00 | Coming-of-Age Day |
|
| 0 |
| Japan | 20120111 10:30:00 | Coincident Index | 90.3 | 91.4 | 1 |
| Japan | 20120111 10:30:00 | Leading Economic Index | 92.9 | 92 | 2 |
| Japan | 20120112 05:20:00 | Current Account n.s.a. | ¥246.8B | ¥562.4B | 1 |
| Japan | 20120112 05:20:00 | Trade Balance - BOP Basis | ¥-599.4B | ¥206.1B | 2 |
| Japan | 20120112 10:30:00 | Eco Watchers Survey: Current |
| 45 | 2 |
| Japan | 20120112 10:30:00 | Eco Watchers Survey: Outlook |
| 44.7 | 2 |
| Japan | 20120112 11:30:00 | Machine Tool Orders (YoY) |
| 26% | 2 |
| Japan | 20120113 05:20:00 | Money Supply M2+CD (YoY) | 3% | 3% | 1 |
| United Kingdom | 20120109 13:30:00 | Halifax House Prices (MoM) |
| -0.90% | 1 |
| United Kingdom | 20120109 13:30:00 | Halifax House Prices (3m/YoY) |
| -1% | 1 |
| United Kingdom | 20120110 05:31:00 | BRC Retail Sales Monitor - All (YoY) | 0.50% | -1.60% | 1 |
| United Kingdom | 20120110 05:31:00 | RICS Housing Price Balance | -19 | -17 | 1 |
| United Kingdom | 20120111 05:31:00 | BRC Shop Price Index (MoM) |
| 2% | 1 |
| United Kingdom | 20120111 15:00:00 | Goods Trade Balance | £-8.350 | £-7.557B | 1 |
| United Kingdom | 20120111 15:00:00 | Trade Balance; non-EU | £-5.000 | £-4.554B | 1 |
| United Kingdom | 20120112 15:00:00 | Industrial Production (MoM) | -0.10% | -0.70% | 1 |
| United Kingdom | 20120112 15:00:00 | Industrial Production (YoY) | -2.20% | -1.70% | 2 |
| United Kingdom | 20120112 15:00:00 | Manufacturing Production (MoM) | -0.20% | -0.70% | 1 |
| United Kingdom | 20120112 15:00:00 | Manufacturing Production (YoY) | -0.50% | 0.30% | 2 |
| United Kingdom | 20120112 17:30:00 | BoE Interest Rate Decision | 0.50% | 0.50% | 3 |
| United Kingdom | 20120112 20:30:00 | NIESR GDP Estimate (3M) |
| 0.30% | 2 |
| United Kingdom | 20120113 15:00:00 | Producer Price Index - Input (MoM) n.s.a | -0.10% | 0.10% | 1 |
| United Kingdom | 20120113 15:00:00 | Producer Price Index - Input (YoY) n.s.a | 9.10% | 13.40% | 2 |
| United Kingdom | 20120113 15:00:00 | Producer Price Index - Output (MoM) n.s.a | 0.10% | 0.20% | 1 |
| United Kingdom | 20120113 15:00:00 | Producer Price Index - Output (YoY) n.s.a | 5.00% | 5.40% | 2 |
| United States | 20120110 01:30:00 | Consumer Credit Change | $7.30B | $7.65B | 2 |
| United States | 20120110 20:30:00 | IBD/TIPP Economic Optimism (MoM) |
| 42.8 | 1 |
| United States | 20120110 20:30:00 | Wholesale Inventories | 0.50% | 1.60% | 1 |
| United States | 20120111 17:30:00 | MBA Mortgage Applications |
| -4.10% | 1 |
| United States | 20120111 21:00:00 | EIA Crude Oil Stocks change |
| 2.209M | 1 |
| United States | 20120112 00:30:00 | Fed's Beige Book |
|
| 3 |
| United States | 20120112 19:00:00 | Continuing Jobless Claims |
| 3.595M | 1 |
| United States | 20120112 19:00:00 | Initial Jobless Claims | 375K | 372K | 1 |
| United States | 20120112 19:00:00 | Retail Sales (MoM) | 0.20% | 0.20% | 2 |
| United States | 20120112 19:00:00 | Retail Sales ex Autos (MoM) | 0.30% | 0.20% | 2 |
| United States | 20120112 20:30:00 | Business Inventories | 0.40% | 0.80% | 2 |
| United States | 20120113 00:30:00 | Monthly Budget Statement | -79.0B | -137.3B | 2 |
| United States | 20120113 19:00:00 | Import Price Index (YoY) | -0.10% | 9.90% | 1 |
| United States | 20120113 19:00:00 | Trade Balance | $-44.60 | $-43.47B | 2 |
| United States | 20120113 20:25:00 | Reuters/Michigan Consumer Sentiment Index | 70.5 | 69.9 | 2 |
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