AUD, NZD lead the charge higher, reversing Thursday’s moves. Greek PSI news still awaited at NY close.

Thursday’s data related underperformance by AUD and NZD was reversed on Friday, even though hard commodities were generally softer. SEK and NOK – Thursday's star performers - ended bottom of the G10 pack. So as was the case on Thursday, not an unequivocal ‘risk-on’ day, even though equities eked out small gains and the VIX lost another handle to trade down from 20 to 19. A mix of model and macro funds and stop loss buyers appeared to dominate the AUD flow. Confirmation of agreement on a PSI deal between private bond holders and Athens was lacking as of Friday’s NY close, though the Greek press suggested an outline agreement had been reached regarding all aspects of the swap (face value haircut, coupon(s) and maturity (30yr) on the new bond. However, there was no indication of the extent of likely private sector acceptances (one independent bond commentary service suggested it could be as little as 60%). As such, it remains premature to think that Monday’s euro group meeting will be able to make a big song-and-dance of a PSI deal having been struck, enabling them to quickly finalise the details of the second bail out needed in time for the March 20 Greek bond redemptions. That Portuguese yields reached new record highs on Friday and with spread widening vs. Germany is evidence that the confidence that most markets are expressing towards a ‘non-contagious’ resolution to the Greek PSI talks is far from universal.

 Fiscal Compact to feature on top of Monday’s Euro group agenda – will the ECB be satisfied?

The main item on Monday’s euro group agendas will be the Fiscal ‘Compact’. Media ‘leaks’ suggest that the latest draft to be discussed by Eurozone finance ministers includes a centralised “correction mechanism” to be triggered “automatically” in cases of “significant” deviations from a target structural deficit of 0.5% of GDP. The European Commission will have to set deadlines for budgetary convergence, giving the European Court of Justice the power to fine countries whose balanced budget laws are not abided with. While some of the public concerns expressed by the ECB about the wording of many clauses have reportedly been addressed, a key for the ECB’s blessing may be whether wording to the effect that countries can avoid penalties if they face “exceptional circumstances” stays in; if it does the ECB is unlikely to be happy. This alongside the risk that holdouts to any PSI agreement mean that an eventual deal will be coercive, are reasons in our mind to remains wary of the EUR rally in particular, and with that last week’s risk rally in general .

 IMM data pre-dates EURUSD rally

Friday’s IMM /CFTC data showing that the speculative net EURUSD short extended to yet another record are not as revealing as some might think. They cover the period through Tuesday, and remember last week’s euro rally only really began on Wednesday. This Friday’s data may well show a paring of the net short. Nevertheless, there is undoubtedly still a big net short in place and so plenty of scope for the euro rally to extend. The close relationship between EURUSD and Currency basis swaps for much of 2011 (see Chart) also suggests that a bigger rally is warranted given how far the basis swap has come in. We remain of the view that a push to the 1.3250 area can still be considered no more than a bear market rally. Monday’s initial focus in what is going to be on the 1.3000 level in what will be very holiday thinned, Lunar New Year, Asia markets. This though may make the extension of last week’s move up in EURUSD and commodity currencies and down in USD/Asia, that much easier to achieve if the news from Athens is genuinely good.

USD-INR JAN 2012 MCX-SX FUTURE :-Last week USD/INR opened at 51.805 & went up on the opening day  to 51.9625 to mark the high of the week. It then kept on declining till 50.135 to register the low of the week & finally closed at 50.445.For the week we see initial support at 51.15-51.25 & initial resistance at 50.90-51.00.In the event of breach below 50.15 will head for the 49.50-49.60( low probable case). The cross above 51.00 will lead to 51.70-51.80.Our bias is positive & we see more probability of it moving north but RBI PLICY can be a dominant factor.  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 long on any dip to around  50.20 with the stop of 50.10 for the  target of 50.90 &51.70.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 is vital for profitability of trade & this can be done at that moment of time only.

EURO-USD:-Last week EUR/USD opened at 1.26730 & went up to register the high of 1.29863. It then moved down to register the low of week at 1.26264 & finally closed at 1.29324.For the coming week we see 1.2800-1.2825 as initial support zone & 1.3025-1.3050 as initial resistance. Breach of 1.2800 will lead to head towards 1.2700-1.2725.However a cross above 1.3050 will lead to 1.3125-1.3150.  Swing traders should go long around 1.2830 with the stop of 1.2800 for the target of 1.3025 & 1.3125.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 66.05 & this itself made the high of the week. It then kept on declining to mark the low at 64.5925 & finally closed at 65.105.With the appreciating EURO & appreciating INR, it is likely to show low volatility. For the coming week we see 66.30-66.40 as resistance & 64.60-64.80 as support.  In our view aggressive swing trader should go long around 64.90 with the stop of 64.75 for the target of 66.30.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 1.5316 & went up   to 1.5577 to mark the high of week. It then kept on declining for the rest of the week till 1.5275 to register the low of week & finally closed at 1.5575. For the week we see 1.56500-1.5670 as resistance & 1.5470-1.5490 as support. In our view aggressive swing trader should go long around  1.5500 with the stop of 1.5485 for the target of 1.5650 &1.5770.

GBP-INR JAN 2012 MCX-SX FUTURE :-Last week it opened at 79.41 & went up to register the high of the week at 79.5475. It then relentlessly kept on declining to mark the low of the week at 77.48 & finally closed at 78.0025. With the appreciating GBP & appreciating INR, it will exhibit low volatility. We are of the view that it has good support at 77.50-77.70 & resistance at 79.30-79.50. In our view aggressive swing trader should  go long around 77.80 with the stop of 77.60  for the target of 79.30 -79.50.  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 76.932 & went up to mark the high at 77.320.It then keep on decline to mark the low of week at 76.554 & finally closed at 76.984.For the coming week we see 77.50-77.60 as resistance   & 76.60-76.70 as support. Cross above 77.60 will lead to 78.10-78.20. In our view aggressive swing trader should  go long around 76.80   with the stop of 76.60  for the target of 77.50 & 78.10. 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 67.50 & went up to mark the high of the week at 67.6375. It then kept on declining to mark the low of the week at 65.15 & finally closed at 65.3635.In our view there is initial support at 65.00-65.20 & resistance at 66.30-66.50.Cross above  66.50 will lead to retest of 67.30-67.50. In our view aggressive swing trader should go long around 65.30with the stop of 65.10  for the target of 66.30 & 67.30.

DOLLAR INDEX:-Last week it opened at 81.930 & went up to 81.965 to mark the high of the week.  It then fallen to 80.185 to mark the low of the week & finally closed at 80.406.In our view normally it should find resistance at 81.10-81.20 & support at 80.30-80.40.

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SPECIAL NOTE: -We would earnestly request the readers to read carefully the qualifying conditions for the call to be activated. Without meeting the qualifier conditions call do not get activated & simply cursory look at chart & arrow may lead to erroneous call activation & financial losses.