Greece remains in the driver’s seat

While the USD came under pressure, the moves in both FX and equity markets spent most of the NY trading day in a dull range. Headlines on Greece continue to steer sentiment on the EUR, but EUR managed to come out the top winner against USD in the G10 space. The EUR rally was fuelled by a headline suggesting that the Greek government was drafting an agreement on the bailout deal for political leaders to approve on Tuesday. But, such moves reversed when a Greek government official announced that the meeting among Greek politicians was delayed to Wednesday. In addition, the already postponed Euro group meeting set for Wednesday has once again been postponed to Thursday as reported by the Wall Street Journal. Also, at the end of the trading day, reports stated that the ECB is willing to exchange Greek bonds with EFSF, and the ECB won’t suffer losses on the exchange. The ECB’s concession would contribute to Greek debt reduction. While the private sector holds the majority of Greek debt, some form of official sector participation was almost inevitable for Greece to achieve the proposed 100% debt/GDP ratio by 2020. If the ECB does not suffer from any capital impairment, then a recapitalisation will not be required. But, with an agreement on the Greek austerity measures delayed once again, the market will likely remain range bound until a resolution comes to fruition. However, until then markets will likely remain hostage to the mix of headlines. An eventual resolution suggests that the risk-on trade (and G10/USD support) could come back with greater conviction into next week. However, EURUSD is unlikely to participate in this move, and we continue to like bullish commodity FX plays. EURAUD should continue to move lower having already broken to record lows below 1.2200.

San Francisco Fed Williams scheduled to speak today

Fed Chairman Bernanke’s testimony before the Senate Budget Committee was similar to his testimony before the House Budget Committee. He noted that the decline in the unemployment rate underestimates the weakness in the labour market. Today, the focus turns to San Francisco Fed President Williams. His speech will be interesting considering he is a big proponent of MBS purchases. Our economists expect the Fed’s next round of QE to be in that form.

Australian Westpac Consumer Confidence, German trade data, and Japan Current account on tap today

Following the RBA surprise decision to leave rates unchanged, AUDUSD gave back some of its gains through the day. The RBA highlighted that there was no material weakening of demand and it is likely to maintain a wait-and-see approach. This morning’s Westpac Consumer Confidence data could provide boost to the AUD as we expect an improvement in the data. Also, German trade data will be released. Consensus is looking for a decline in exports; however, given the improvement in the January PMI, it is likely that the decline in exports may be a one-off. Any upside surprise could provide short-lived support for EUR as it confirms that economic conditions in the Eurozone are not as bad as once perceived. The Japanese current account will be released this morning. A shrinking of the current account surplus could call Japan’s ability to fund its ballooning public deficit into question and lead to a spike in JGBs. While MoF officials continue to verbally intervene via warnings against speculative FX moves, we remain of the view that a necessary (but not sufficient) condition for JPY weakness would be for the BoJ to ease policy and expand money supply significantly. However, we are unlikely to get this and remain negative on USDJPY and EURJPY.

USD-INR JAN 2012 MCX-SX FUTURE:- Yesterday it opened at 49.2375 & made the high at 49.465. It had then fallen to 49.03 to mark as low of the day & finally closed at 49.3775.For the day we see initial support at 49.05-49.10, resistance at 49.50-49.55 & this is likely to be trading range of the day. Breach of the support at 49.05 may lead to retest of 48.80-48.85. Cross above 49.55 will lead to head towards 49.70-49.75.  Swing trader should go short near 49.45 with the stop of 49.55  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-INR JAN 2012 MCX-SX FUTURE :-  Yesterday it opened at 64.50 & went down to mark the low at 66.365.  It had then risen to 64.9075 to mark as high of the day & finally closed at 64.8075. For the day we see initial support at 65.00-65.10 & resistance at 65.50-65.60.Breach of 65.00 will lead to retest of 64.65--64.75.Cross above 65.60 will lead to 65.95-66.05.   In our view aggressive swing trader should go long around 65.15 with the stop of 65.00 for the target of 65.50 & 65.95. 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 78.00-78.10 & resistance at 78.30-78.40. Cross above of 78.40 will lead to retest of 78.70-78.80.  In our view traders should go LONG around 78.20 with the stop of 78.00 or on cross above of 78.40  for the target of  78.70 & higher.                   

JPYINR JAN 2012 MCX FUTURE :-   For the day we see initial support at 63.70-63.80 & resistance at 64-40-64.50.Breach of 63.70 will  lead to retest of 63.20-63.30.  In our view traders should go SHORT around 64.30  with the stop of 64.45  for the target  of  63.80 &  63.30 .

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