03/09/2018

FX MORNING UPDATE                                                                                      

USDINR opened at 70.95 on Friday and the pair traded in the 70.85-71 range. Spot USDINR closed at 70.99, gain of 25 ps ps for USD as against prior close of 70.74.RBI reference rate was fixed at 70.92. Rupee has declined 11% from its high levels of 63.25 in this calendar year. Rupee decline was unabated as banks bought for defense related purchases. Rising Crude oil prices added to concern that deficit will widen even further. Sep USD/INR closed at 71.25, gain of 31 ps for USD as compared to prior day’s close of 70.94. Sep Euro/INR closed at 83.09, GBP/INR at 92.60 and Yen/INR at 64.32.

FII’S have bought Rs 72 Cr of Indian Equities in Aug till 29/8 . FII’S have bought Rs 3801 Cr of Indian debt securities in Aug 29/8 . On a cumulative basis, FII’S have bought Rupees 2101 Cr of Indian Equities till date for this calendar year and have sold  Rupees 37338 Cr of Indian debt in this calendar year till date.

Benchmark Nifty closed flat on Friday. DOW declined 22 points (0.09%) on Friday. Nikkei declined 0.02% and Hang seng declined 0.98 % on Friday.

Euro is now at 1.1603, Pound at 1.2958,Yen at 111.09.    

Commodities: Gold is now at USD 1206 and WT1Crude at USD 69.91.

Interest rates: USD 10 Yr yield is at 2.86% and 3 m libor closed at 2.36%. Indian 10 yr benchmark yield closed at 7.95%.        

Economic news: Indian GDP climbed 8.2% in Q1. This is the highest growth rate since 2014-15. Last quarter GDP expanded 7.7%. Mfrg climbed 13.5%, agri sector grew by 5.3% and services climbed 6.5%. GVA climbed 8%. Construction activity, has also rebounded strongly, growing 8.7 percent in April-June, from 1.8 percent in the same quarter last year, showing heightened activity in infrastructure, particularly road construction Rupee depreciation and aggregate demand build up are expected to support growth rate. NPA cycle is tapering off due to aggressive provisioning by PSU banks.                                              

Credit growth is at 12.9%. Private final consumption expenditure (PFCE), in inflation-adjusted prices — a gauge to measure changes in household spending — grew 8.6 percent in April-June. Government expenditure grew 7.5 percent at constant prices during the quarter-ended June. Gross Fixed Capital Formation (GFCF), a useful metric to measure corporate investment activity, grew 10.0 percent in April-June.

Core sector grew by 6.6% in July. In Apr-July period of 2018, core sector has grown 5.8%.

EU regretted US President’s rhetoric on tariffs and asked US to honor the trade ceasefire agreement. EU official said that “the economic policy of the United States is currently one of the substantial risks to the global economy.” And he warned that unpredictable trade and economic policy, biased rulings in U.S. courts and the dominant role of the Dollar were bad for Europe. He added that there was an increasing interest for Europe “to free oneself from a one-sided dominance.”

Data Highlights : – US Chicago PMI climbed to 63.6.

-German retail sales declined -0.4% m/m. EU CPI was below estimate at 2% y/y. Unempolument rate was at 8.2%.

-Japanese  housing starts declined -0.7% y/y. Unemployment rate was at 2.5%.

Monday’s calendar: – EU PMI(mfrg) and UK PMI(mfrg)

Daily Support/Resistance table

MAJOR SUPPORTS/RESISTANCES AND TREND TABLE

Technicals: Spot closed above 100 and 200 day major moving averages. 20 day moving is at 69.58. 50 day moving average is at 69. 200 day moving average is at 66.22. Daily MACD is in buy zone, implying bottom at 68.30 . Important support zone is at 70.30 and later at 69.52. Important resistance is at 71.40. Spot closed above its average level of the day.  

Intra day supports and resistances for Sep contract are:

PP: 71.17,S1:71.09, S2:70.94, R1:71.32, R2:71.40.                                                              

Hedging strategy for USD/INR: Hedging decisions be taken according to comfort and accounting rates.

CROSS CURRENCY TECHNICALS:

EURO/USD: The pair is below 100 and 200 day major moving averages. Next Major resistance is at 1.1730 and later at 1.1960. Major support is at 1.13. Daily MACD is in buy zone, implying an important bottom at 1.13. Weekly MACD is in sell zone, implying important top at 1.2560.

GBP/USD: Trend is bearish in daily chart. Daily MACD  is in buy zone, implying important bottom at 1.2662 and weekly MACD is  in sell zone, implying important top at 1.4375. The pair is trading below all major moving averages. Important resistance is at 1.3050 and later at 1.3250. Important support is at 1.2660.

USD/YEN: The pair is above major moving averages. Daily MACD is in buy zone, implying important bottom at 109.70. Next important support is at 109.70. Important resistance is  113.