New local EUR highs on troika/Greek government austerity/reform ‘‘deal’

The Ecofin meeting is still in progress at time of writing, but no formal announcement of a deal on a second bail-out is

expected (German FinMin Schaeuble has been telling reporters not to expect one). Nevertheless news headlines saying the Greek government, with the support of all the main parties, has agreed the austerity/reform conditions acceptable to the troika mean that this should now be largely a question of formalities. EURUSD traded to a new local high above 1.33 on this assumption. Mr Draghi failed to clarify the treatment of GGBs on the ECB’s balance sheet in his post-Council meeting press conference, but appeared to signify a willingness to accept a ‘no profit, no loss’ deal that would see its GGBs transferred back to the EFSF prior to a PSI deal being concluded. The latter is likely to include the insertion then activation of CACs that will make the bond swap coercive for some and likely trigger CDS. If the final pieces of the bail-out jigsaw slot into place in coming days, we see potential for the EURUSD rally to extend, quite possibly to the 1.35 area. EUR support was also drawn from the ECB’s failure to signal a likely rate cut next month, though we continue to see one as quite likely.

 Michigan CSI rise may feed the risk rally, weaken USD

The most important data point today with potential to keep feeding the risk-on mood data is the February University of

Michigan Consumer Sentiment Index. Last week’s strong employment report may well have countered the widespread media publicity given to the likelihood of sharply higher gasoline prices in coming weeks and worries about Europe, to drive a sixth consecutive monthly increase (BNP 77.0 from 75.0, vs. consensus 74.8). Next Tuesday’s retail sales report is likely to reflect the willingness of consumers to spend in the face of ongoing deleveraging pressures, and not just because of healthy auto sales. If so, then this can keep the risk fires burning even if at the same time expectations for additional QE steps by the Fed are diminishing. With US mutual funds still heavily underweight foreign assets, we continue to expect good economic news to be associated with USD weakness as some of the cash being put to work leaks abroad. For more on this see the feature in our latest FX Weekly ‘Renewed US portfolio outflows can drive USD down’. We also get latest US trade data today. Even if exports show a pick up in line with better global growth indictors, higher oil prices are likely to have driven an even stronger rise in imports to see the deficit widen on November’s $47.8bn.

USD-INR FEB 2012 MCX-SX FUTURE:- Yesterday it opened at 49.44 & made the low at 49.36. It had then risen to 49.72 to mark as high of the day & finally closed at 49.695.For the day we see initial support at 49.55-49.60, resistance at 49.85-49.90 & this is likely to be trading range of the day. Breach of the support at 49.55 may lead to retest of 49.20-49.25. Cross above 49.90 will lead to head towards 50.15-50.20.  Swing trader should go short around   49.90 with the stop of 50.00  for the target of  49.60 & 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 FEB 2012 MCX-SX FUTURE :-  Yesterday it opened at 65.45 & went down to mark the low at 65.41.  It had then risen to 65.975 to mark as high of the day & finally closed at 65.9475. For the day we see initial support at 65.70-65.80 & resistance at 66.10-66.20.Breach of 65.70 will lead to retest of 65.30-65.40.Cross above 66.20 will lead to 66.70-66.80.   In our view aggressive swing trader should go long near65.80with the stop of 65.65 or on cross above 66.20  for the target of 66.70 & higher. 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 FEB 2012 MCX FUTURE :- For the day we see  initial support at 78.30-78.40 & resistance at 79.00-79.10.Cross above 79.10 will lead to79.70  In our view traders should go long around 78.40 with the stop of 78.30  for the target of  79.10 & higher.      

JPYINR FEB 2012 MCX FUTURE :-   For the day we see  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 64.50  for the target  of  63.80  & lower.