EUR short covering rally gathers momentum, but SEK and NOK the G10 stars.
Thursday could hardly be described an unequivocal 'risk on' day, with US equities posting only minor gains into the close (and ahead of Google, IBM, Intel and Microsoft's earnings.  Google disappointed unlike the other three IT heavyweights who all beat their street EPS estimates).  NZD and AUD failed to retrace all of their post CPI and employment data, respectively, hits while CAD lost ground despite better than expected manufacturing sales. Allocations into SEK and NOK out of other G10 currencies continued to leave these two currencies the biggest gainers on the day.  But the recovering EUR, both vs. USD and on most crosses, captured most of the headlines.  The absence of any negative news headline shocks out of the Eurozone (on the status of Greek PSI talks in particular – talks continue Friday) was good enough to see the squeeze/covering of short euro positions continue.  There was plenty of profit taking into this (easily absorbed) from the interbank market in particular from traders who got in on the rally earlier in the week.  US data was a mixed bag, housing starts retracing a good chunk of the big November rise, with the volatile multiple family starts sub-component to blame in both cases; Philly Fed Index falling back to 7.3 from 10.3 in December, CPI as expected with core printing +0.1%, and much lower than forecast initial unemployment claims – 352k down from a revised 402k last week.  Kodak's Chapter 11 filing on Wednesday night had been anticipated months ago so had no impact, while BofA's better than expected results was one reason for the equity 'up' day.
Greek debt swap talks ahead of Monday's Eco Fin the main focus Friday.
The IIF delegation to the Greek bond swap talks in Athens reported 'progress' made on Thursday amid 'productive discussions' but gave no more detail than that.  Talks are slated to continue on Friday.   Expectations seemingly run high for some sort of outline deal being reached as early as Friday between Athens and the country's major (not all) bondholders and ahead of Monday's euro group finance ministers meeting.  If news headlines validate this view, there is every chance the euro will move higher still; indeed at least until we reach or exceed the 1.3250 area (38.2% retracement of the whole late October-mid-January sell-off) the view (we share) that we are witnessing nothing more than a bear market rally is likely to persist. We regard the risk of bad news shocks undermining the rally as high, as discussed in detail in our latest FX Weekly, and continue to recommend insurance against a risk sentiment reversal by taking advantage of current low volatility levels (in AUDUSD in particular).

Fiscal Compact drafts to be parsed; US home sales, Canada CPI, UK retail sales due.
Also relevant on Friday will be wording of the new fiscal compact (fresh drafts of which are likely to be in circulation through the day) and where interest will be in whether the wording objected to by the ECB (in particular offering get-out clauses from fresh fiscal rectitude in the event of breaches of fiscal guidelines if prevailing economic conditions are dire) has been changed back to the ECB's likely satisfaction. On the data front, the highlights are Canadian December CPI, US existing home sales and UK retail sales.   EURCAD demand bought USDCAD off the lows Thursday and more of the former may mean additional USDCAD gains, especially if CPI proves benign, but we continue to like CAD on a strategic basis.  A strong retail sales print (market +0.7% ex-petrol) should be seen in the context of the 0.7% Nov drop and shouldn't move GBP.

USD-INR JAN 2012 MCX-SX FUTURE:- Yesterday it opened at 50.3400 &  made the high at 50.5575 of the day. It had then fallen to 50.1350 to mark as low of the day & finally closed at 50.3750.For the day we see initial support at 50.20-50.25, resistance at 50.50-50.55 & this is likely to be trading range of the day. Breach of the support at 50.20 may lead to retest of 50.00-50.05. Cross above 50.55 will lead to head towards 50.90-50.95.  Swing trader should go long on cross above 50.55  with the stop of 50.40. for the target of   50.90. Kindly reduce the quantum of lot as stoploss used are wide due to volatility. Remember traders discretion & judgment of price behaviour during the entry of 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 64.77 & made the high at 65.1375 of the day. It had then fallen to 64.5925 to mark as low of the day & finally closed at 65.0050. For the day we see initial support at 64.90-65.00 & resistance at 65.50-65.60.Cross above of 65.60 will lead to retest of 66.10-66.20.   In our view aggressive  swing trader should go long around  65.20  with the stop of 65.00  for the target of 65.50 & 66.20. 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 support at 77.50-77.60 & resistance at 78.50-78.60 .Cross above 78.60 will lead to retest of 79.40-79.50.  In our view traders should go long around 77.70 with the stop of 77.50 for the target of 78.50 & 79.40.                   

JPYINR JAN 2012 MCX FUTURE :-   For the day we see  support at 65.00-65.10 & resistance at 65.75-65.85. Cross above 65.85 will lead to retest of 66.40-66.50   In our view traders should go long around 65.15  with the stop of 65.00  for the target  of  65.85 & 66.50.

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