DAILY MARKET COMMENTARY: Thursday - February 7, 2013

The Indian Rupee opened at 53.12 levels after closing yesterday at 53.16 levels. The Intraday range for the rupee is seen between 52.90 – 53.30 levels.

The Asian markets and the Euro paused after hitting the record highs ahead of a European Central Bank policy decision and remarks from ECB President Mario Draghi on prospects for the euro zone economy. The ECB is expected to keep interest rates at a record low 0.75%, but Draghi may face a grilling over an Italian banking scandal.

Markets will also focus on any comments about the euro's recent strength as well as the bank's view on the euro zone economy but a corruption scandal in Spain and uncertainty over the outcome of an Italian election later this month brought market focus back to the region's potential political instability. Later on today Spain will test investor appetite by offering up to 4.5 billion Euros of bonds.

Looking at the local news, Finance Minister P. Chidambaram warned on Wednesday that cuts in the security budget could affect the country's defence preparedness to curtail the lingering budget deficit. The Food act bill which is expected to be a part of the budget this year will certainly act as an obstacle to the FM efforts.

India's central bank could limit gold imports by banks in "extreme circumstances," it said on Wednesday, as it put forward measures to help the world's biggest consumer of gold rein in purchases and battle a record-high current account deficit.

Events to watch for the day will be advance GDP estimates for 2012/13 and government's share sale in NTPC.

The US 10 year treasury yield dropped below 5%, at 1.96%. The Indian federal 10 year bond yield closed 1 bps lower at 7.91% as compared to its previous closing.

Outlook: As suggested earlier, exporter should wait to initiate exports covers. In case they cover they should only look at long term covers over 9-12 months where premiums are almost all time high. Importers should make the most of the correction in the market and Importers should cover on dips as and when comfortable and keep stop a loss of 53.50 levels maximum. OVERALL: USD/INR pair still maintains bullish.

EUR/USD:  The Euro is trading at 1.3509 levels against the US dollar. The Euro was seen depreciating against the US dollar ahead of the ECB meeting which is scheduled today. The expectation from the ECB President Mario Draghi is to provide clarity over the political and banking turmoil signaling towards the renewal of the region’s sovereign debt. The ECB is also expected to give its view about the euro performance against the US Dollar i. e. whether the euro appreciation is is positive or negative signal for the Euro zone. The near term support is at 1.3308 and resistance is at 1.3680.

GBP/USD: The British Pound fell to its five month low against US Dollar. Currently, the British Pound is trading at 1.5644 levels. No major economic data have been released in past 24 hrs showing no clue for the Sterling. Today, the Governor of BOE, Mr. Carney will be speaking on Asset purchase facility and monetary policy. The manufacturing PMI figures are due for the day with the expectation of better than the previous month. The pair is expected to find a support near 1.5624 levels and the resistance is near 1.5845 levels. 

AUD/USD: This is the second day for Australian Dollar to trade below the 1.0350 levels. The AUD is currently trading at 1.0306 levels despite positive data. Unemployment rate reduced from 5.5% to 5.4% whereas as Employment increased from 5.8k to 10.4k in the month of February. Investors are cautious ahead of ECB Monetary Policy Statement because of which we saw the commodity currency falling drastically.  The near term support is seen at 1.0237 levels while the immediate resistance is at 1.0423 levels. 

USD/JPY:  The Yen is trading at 93.52 levels. The yen is seen continuing its depreciation rally against the US dollar. The yen saw a fall after the Bank of Japan Governor Shirakawa said he will step down on March 19. It is expected that the Japan’s government will rush for the new central bank chief selection for further steps in achieving the inflation target. The uptrend in USD/JPY should remain intact but the currency pair could come under additional profit taking and later would be pulled back. The near term support is seen at 88.00 and resistance is at 92.80.

Gold: Gold was trading marginally higher at $1678 per ounce. The gold is trading on a lacklustre note. The near term support is at $ 1674 levels whereas resistance is seen at $ 1683 levels.

Crude oil:  The crude oil is seen trading at 96.74 levels. The crude oil prices saw a fall of 95.04 levels before rebounding to current 96 levels.  The near term support is at 95.60 and resistance is at 98.50 levels.

Dollar Index: The US Dollar Index is trading at 79.80 levels. The dollar index can be seen under pressure ahead of the ECB and the BoE monetary policy meetings. No U.S. economic reports were released yesterday but the rally in safe currencies suggests that investors are starting to get nervous.  The dollar could get some play after this weekend's G20 meeting. Jobless claims are due for release today. The Support is seen near 78.99 and resistance is at 80.67 levels.

(Source: Corporate Communications, India Forex Advisors Pvt Ltd)