Still waiting on Greek PSI+ deal, but markets rally irrespective of deal

While the market was anticipating details of the Greek PSI+ following weekend discussions with private bond holders, the Discussions stalled, with Greece saying Monday is aimed to submit an official offer on the bond swap by February 13. The Key point of contention is reportedly the coupon on new 30-year bonds Greece will offer in exchange for current holdings (And therefore the NPV value of the loss bond holders will suffer). Eurozone officials late on Monday formally rejected the

Greek PSI offer on the basis of the coupon being offered. This in turn appears to stem from concerns among them that the target of a debt/GDP ratio of 120% by 2020 is not ambitious enough to imply debt sustainability (suggestions are that something near 100% is needed, if not as early as 2020). This debate on debt sustainability has increased contagion concerns somewhat, to Portugal in particular (where the IMF projects its debt/GDP ratio peaking at 115% in 2013/2014), though spreads and absolute yields were slightly back from last week’s highs on Monday. And Ireland’s debt characteristics aren’t very dissimilar to Portugal’s. Despite all these risks, EUR is trading above 1.3000 and European financials rallied on the day. Eurozone financials were supported by an FT report that the French and German FinMin will call for a relaxation of Basel III to ease the pressure on banks/reduce risk of a credit crunch. Also supportive for Eurozone sentiment was

another FT report suggesting Germany was now open to boosting the euro zone’s rescue funds to EUR750bn by allowing the EFSF (EUR250bn) to run parallel with the ESM (EUR500bn) in exchange for stricter budget rules than included in the Current draft of the fiscal ‘compact’ and perhaps more to the ECB’s satisfaction. This new fiscal compact is what is being addressed at the EU FinMin meeting which resumes Tuesday. Concerns over whether wording acceptable to the ECB can be agreed, together with no clear deal on the PSI+ talks makes us wary of the current EUR and overall risk rally as the market may be complacent about the risks at hand. We expect investors to sell into further rallies and continue to look for lower levels on the EUR crosses, especially, EURJPY, EURGBP and EURAUD.

 Eurozone PMIs expected to improve slightly, providing support to EUR

While we await the statement from the Euro group meeting as well as progress on the PSI+ talks, the markets are likely to Shift their focus on the Eurozone ‘Flash PMIs. The PMI data should continue to improve albeit from levels consistent with Weak activity. The divergence within the Eurozone will remain quite stark with Germany’s output index indicative of a return to expansion and a contraction in the peripherals. The forward looking indicators will be important in assessing the overall Momentum in the different sectors. Any improvement in the euro directly linked to better PMIs is likely to prove temporary in the absence of good news out of Brussels.

 BOJ announcement likely to be a non-event, but Fed meeting is key for USDJPY

The BoJ meeting this morning is likely to be a non-event. With USDJPY comfortably trading above 76.00 and EURJPY above 100.00, the MOF is unlikely to pressure the BoJ to proceed with another round of FX intervention (where USDJPY or EURJPY). The BoJ remains at ease with its current policy stance as monetary policy is ultra-loose and the JPY REER still below the long term average. However, the risk for USDJPY could potentially come on Wednesday when the Fed reveals its

New forecasts. If Treasury yields were to fall further on the back of the FOMC, USDJPY could be back under pressure.

USD-INR JAN 2012 MCX-SX FUTURE:- Yesterday it opened at 50.40 &  made the high at 50.485 of the day. It had then fallen to 50.135 to mark as low of the day & finally closed at 50.1725.For the day we see initial support at 50.10-50.00, resistance at 50.25-50.35 & this is likely to be trading range of the day. Breach of the support at 50.00 may lead to retest of 49.70-49.80. Cross above 50.35 will lead to head towards 50.60-50.70.  Swing trader should go long around 50.00  with the stop of 49.95 for the target of   50.25. 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-USD:- Yesterday it opened at 1.29280 & made the high at 1.3053. It had then fallen to 1.2856 to mark as the low of the day & finally closed at 1.3009. For the day we see support at 1.2950-1.2970 & initial resistance at 1.3050-1.3070.The cross above 1.3070 will lead to retest of the 1.3130-1.3150.  Swing trader should go long around 1.2980  with the stop of 1.2950 for the target  1.3070 &1.3150 . 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 64.11 & made the high at 65.205 of the day. It had then fallen to 64.785 to mark as low of the day & finally closed at 65.1475. For the day we see initial support at 64.60-64.70 & resistance at 65.30-65.40.Cross above of 65.40 will lead to retest of 66.10-66.20.   In our view aggressive  swing trader should go SHORT around  65.30  with the stop of 65.40  for the target of 64.70. 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 77.55-77.65 & resistance at 78.40-78.50 .Cross above 78.50 will lead to retest of 78.90-79.00.  In our view traders should go long around 77.60 with the stop of 77.50 for the target of 78.50 & 79.00.                   

JPYINR JAN 2012 MCX FUTURE :-   For the day we see  support at 64.90-65.00 & resistance at 65.80-65.90 Cross above 65.90 will lead to retest of 66.30-66.40   In our view traders should go long around 65.00  with the stop of 64.85  for the target  of  65.80 & 66.4.

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