Greek PSI+ aside for now with NFP report on the schedule today

The risk-on rally lost some steam by the end of the NY trading day with US equities ending the day basically flat while USD strengthened against most of G10 FX. In the meantime, we continue to wait for an announcement on the Greek PSI+ talks. EU commission Olli Rehn announced yet another deadline on the Greek PSI talks; this time by the end of this week. Comments from the Greek finance minister indicate that key issues stall a resolution. He said that one of the remaining issues on closing the PSI is official sector participation and explained that the public sector must be involved. Though the private sector holds the majority of Greek debt, some form of official sector participation is evidently required in order to achieve the much vaunted ‘120% by 2020’ debt/GDP ratio, assuming the PSI itself proceeds in line with latest media reports (and which entails a NPV loss of 70% or slightly higher). If the ECB were to agree to take a haircut beyond the purchase price of their SMP holdings, this would result in capital impairment requiring recapitalisation. Any perception of loss of ECB independence in such an event could weigh negatively on EUR. Greece aside, markets are likely to trade sideways ahead of today’s all-important NFP report. Our economists look for +125K (vs.145K BBG median). Even if we do see a decline in jobs growth for January, +125k is consistent with solid underlying hiring trends but will not be bringing the unemployment rate materially lower. As re-emphasised by Fed Chairman Ben Bernanke on Thursday in testimony before Congress, the US has a long way to go before the jobs market can be considered normal.

 Likely improvement in UK services PMI will not change our view for more BoE QE next week

Besides NFP, US non-manufacturing ISM will also be released Friday. We expect an increase reflecting the pick up in the retail sector and a generally better economic sentiment. This should prove positive for risk and boost commodity currencies in particular. Meanwhile, the UK PMI Services will likely point to improving service sector activity albeit at a moderate pace, forecast to come in slightly higher in January (54.5) vs. December (54.0). With the services sector comprising over 70% of the UK economy, a bounce should be GBP supportive. But better services PMI will not play down our expectations of the BoE going through with yet another round of QE next week. BoE’s arch dove Posen explained that there is a case for another 75bn in stimulus – which is indeed what our economists expect to be announced.

 SNB to staunchly defend the floor; Canadian employment to improve.

As EURCHF continues to trade near the 1.20 floor and real exports surged in the month of December, noise from SNB’s Jordan escalated on Wednesday. The acting president reiterated the central bank’s commitment to the EURCHF 1.20 floor and willingness to do defend it at all costs. A test of the SNB’s resolve by the market is likely fail in our view. A resolution on the Greek PSI+ talks coupled with the continued determination of the SNB to the floor should provide the catalyst for EURCHF higher. In Canada, we see a small bounce in the January payroll numbers from 17.5k in December to 20k in January which is overall in line with consensus (22k). Nevertheless, this is unlikely to affect the employment outlook since the economy has only added 7.4k jobs over the past six months. While a weak number may weigh negatively on CAD, a resolution on Greek PSI and better NFP numbers will be the key factors to drive CAD. Despite weak data out of Canada, USDCAD has fallen below parity largely because of a very dovish FOMC and the improving risk sentiment

USD-INR JAN 2012 MCX-SX FUTURE:- Yesterday it opened at 49.415 & made the low at 49.2125. It had then risen to 49.545 to mark as high of the day & finally closed at 49.4075.For the day we see initial support at 49.25-49.30, resistance at 49.55-49.60 & this is likely to be trading range of the day. Breach of the support at 49.40 may lead to retest of 49.00-49.05. Cross above 49.60 will lead to head towards 49.70-49.75.  Swing trader should go short near 49.60 with the stop of 49.70 or on breach of 49.25  for the target of  49.05 & lower. Kindly reduce the quantum of lot as stop loss 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 1.3159 & made the high at 1.3197. It had then fallen to 1.3086 to mark as the low of the day & finally closed at 1.3143. For the day we see initial support at 1.3075-1.3100 &resistance at 1.3225-1.3250.The cross above 1.3250 will lead to retest of the 1.3375-1.3400. Breach of support 1.3075 will lead to retest of 1.3000-1.3025.  Swing trader should go long around 1.3100 with the stop of 1.3090 for the target 1.3250 & 1.3400. 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 65.075 & went down to mark the low at 64.79.  It had then risen to 65.20 to mark as high of the day & finally closed at 64.9025. For the day we see initial support at 64.75-64.85 & resistance at 65.20-65.30.Breach of 64.75 will lead to retest of 64.50-64.60.Cross above 65.30 will lead to 65.50-65.60.   In our view aggressive swing trader should go long around 64.85 with the stop of 64.75 for the target of 65.30 & 65.60. 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  initial support at 77.90-78.00 & resistance at 78.40-78.50. Breach of support 77.90 will lead to retest of 77.10-77.20.  In our view traders should go short around 78.40 with the stop of 78.50 or on breach of 77.90 for the target of  77.20.                   

JPYINR JAN 2012 MCX FUTURE :-   For the day we see  support at 64.50-64.60 & resistance at 65.50-65.60.Breach of 64.50 will  lead to retest of 63.50-63.60.  In our view traders should go SHORT  around 65.40  with the stop of 65.60  for the target  of  64.60  & lower.