Post-FOMC party breaks up without major incident

The dollar sell-off ran its course quite early on in the New York session Thursday even though there were no major negative news stories to put the damper on Wednesday’s Fed-induced risk rampage. Indeed, the message from the durable goods orders release was a positive one and challenges the reference in the FOMC statement to weakening business investment. Importantly though, US equities lost ground (profit-taking generally cited) with a commensurate up-tick in the VIX. Flows wise, custodian accounts were among the most active and mostly on the USD buy side in both developed and local market currency pairs. Eurozone-specific news flow was limited, though local Greek press reports suggesting that PSI talks had produced an agreement on an average coupon on new Greek bonds of 3.75% (splitting the difference between what the IIF and Athens had reportedly agreed last week (around 4%) and the troika had apparently demanded (3.5%) was viewed as positive. This masks the real debate on achieving Greek debt sustainability, notably about whether the ECB should take a haircut on its SMP holdings of Greek paper and if so how much. EU Economic and Monetary Affairs Commissioner Olli

Rehn told Reuters that a PSI deal was close, but that once agreed there was likely to be a need for public money to make up a shortfall in Greek funding needs (i.e., above the EUR130bn previously agreed). He was non-committal on whether this should come via an ECB write down, extra government commitments, or some combination of the two. EURUSD was near flat on the day, JPY the biggest winner and so undoing some of the earlier week USDJPY run-up, SEK again the G10 ugly duckling, off some 0.7%.

 US GDP, Swiss KoF, Eurozone M3 due – latter relevant to the ECB QE debate and with that EUR

Friday may be dominated by corporate flow for month-end settlement ahead of whatever real money hedge related flows that should feature next Tuesday. The data calendar is of interest, and while the first estimate of Q4 US GDP will likely hog the headlines (consensus 3.0%, BNP Paribas 2.7% and with strong auto sales seen as the key driver of strength) we are more interested in the latest (Dec) Eurozone M3 and bank lending data. Beyond whatever happens with the end-Feb 3- year LTRO allocation, key to whether the ECB ultimately engages in more ‘conventional’ QE policy is likely to be whether money and credit growth falls short of what is seen consistent with a return to trend growth and price stability. The M3 data will also set the backdrop for what is going to be keenly parsed ECB quarterly lending survey due next Wednesday. If the data is weak (say sub-2% on yr/yr M3 growth) this would play to the ECB QE view and as such should be viewed as EUR negative. Also of interest Friday is the latest Swiss KoF leading indicator. A dip into negative territory is expected but BNP Paribas sees risk of a small bounce (as per the likes of latest German PMI data). If so, this could have some suggesting (erroneously we are sure) that SNB resolve to preserve the 1.20 EURCHF floor could start to waver. Swedish retail sales will also be noted given that weak data this week has had a hand in the SEK’s heavy underperformance.

 IMM data of more interest than usual

3:30pm ET will see the latest IMM data, for the week ended Tuesday. This captures a good chunk of the EURUSD rally (that began in earnest last Wednesday) and the extent to which that has been driven or accompanied by a paring of speculative futures shorts will be notable (see chart). We suspect the net short will be seen to still be extremely large.

USD-INR JAN 2012 MCX-SX FUTURE:- Yesterday it opened at 50.3750 &  made the high at 50.6450 of the day. It had then fallen to 50.3400 to mark as low of the day & finally closed at 50.5625.For the day we see initial support at 49.95-50.00, resistance at 50.35-50.40 & this is likely to be trading range of the day. Breach of the support at 49.95 may lead to retest of 49.55-49.60. Cross above 50.40 will lead to head towards 50.60-50.65.  Swing trader should go short on breach of 49.95  with the stop of 50.05 for the target of  49.60 & lower. 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 1.3104 & made the high at 1.3184. It had then fallen to 1.3091 to mark as the low of the day & finally closed at 1.3106. For the day we see support at 1.3000-1.3020 & initial resistance at 1.3130-1.3150.The cross above 1.3150 will lead to retest of the 1.3200-1.3220.Breach of 1.3000 will lead to retest of 1.2930-1.2950. Swing trader should go short around 1.3120  with the stop of 1.3150 for the target 1.3000 & 1.2950 . 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 65.5050 & made the high at 65.6950 of the day. It had then fallen to 64.675 to mark as low of the day & finally closed at 65.5350. For the day we see support at 65.45-65.50 & resistance at 65.75-65.80.Cross above of 65.80 will lead to retest of 65.90-65.95.Breach of 65.45 will lead to retest of 65.20-65.25.   In our view aggressive  swing trader should go short around  65.75  with the stop of 65.85  for the target of 65.45 & 65.20. 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 78.20-78.30 & resistance at 79.00-79.10 .Cross above 79.10 will lead to retest of 79.70-79.80.  In our view traders should go long around 78.30 with the stop of 78.10 for the target of 79.00 &79.70.                   

JPYINR JAN 2012 MCX FUTURE :-   For the day we see  support at 63.50-63.70 & resistance at 65.70-65.90.  In our view traders should go SHORT  around 65.70  with the stop of 65.95  for the target  of  63.70 & lower.