27 January 2011

TECHNICAL OUTLOOK

Recommendations for futures:

USD/INR: Traders are suggested to buy USD/INR February futures around 45.75 levels while sell near 46.00 levels for intraday trading.

EUR/INR: Traders are suggested to buy EUR/INR February futures around 62.65 levels while sell near 62.95 levels for intraday trading.

Day gone by:
INR spot opened the day on a firm note at 45.5100 levels and initially hit a high of 45.4550 levels tracking the positive local stock market and gains in Euro. However, post release of the RBI credit policy, INR spot lost its shine and weakened to 45.77 levels on account of sharp downfall in local equity. INR spot ended the day at 45.7100 levels. RBI hikes Repo & Reverse repo rate by 25 bps to 6.50% & 5.50% respectively & leaves CRR unchanged at 6.00%, extends SLR leeway of 1.00% till April 8, 2011.

Day ahead:
INR spot is likely to open slightly firm around 45.65 levels and trade in a range between 45.50-45.80 levels. Month end dollar demand from oil refiners would keep the INR spot biddish while softer USD on back of grim U.S. economic outlook by Fed and bullish equity could stem INR spot’s sharp losses. Technically, USD/INR spot has formed a big bullish candle and has perfectly taken the trendline support (as shown in the chart) indicating its
further bullish momentum. A convincing break of 45.78 levels shall open up the gateway for a swift upmove to 46.10 levels. On the downside, it is well supported at 45.45 and 45.30 levels. Technical indicators are displaying bullishness but RSI is signaling caution on the upmove.
 

Global Market Outlook:

• The dollar slipped yesterday, with weakness expected to continue the rest of the week after the Federal Reserve kept interest rates low and gave a tepid assessment of the U.S. economy that ensured its Treasury bond-buying program remains in place until June.

• In a statement, the Fed, which voted unanimously at a regular policy meeting to hold interest rates steady, said the U.S. economic recovery, while continuing, has been "insufficient to bring about a significant improvement in labor market conditions." It repeated that rates will remain exceptionally low for an extended period.

• The Fed also gave a nod to pressures from rising commodity prices but said measures of underlying inflation remained "somewhat low." This was in sharp contrast to the European Central Bank's view that the recent surge in commodity inflation posed a threat to the region's inflation.

• The market took the euro up, but the euro is looking somewhat heavy above $1.37, with plenty of sellers emerging, taking it right back down and taking out the short term longs.

• The Reserve Bank of New Zealand also kept rates unchanged at 3.0 percent, as expected, reaffirming that rates are likely to rise modestly over the next two years. The New Zealand dollar gained versus the greenback after the decision, rising to US$0.7719 from US$0.7649.

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