DAILY MARKET REPORT: FRIDAY - January 4, 2013

The Indian Rupee opened at 54.82 levels after closing yesterday at 54.50 levels. The Intraday range for the rupee is expected between 54.65 - 55.00 levels.

The Reserve Bank of India Governor Duvvuri Subbarao said on Thursday central banks need to be independent to make monetary policy decisions. The remarks come at a time when RBI is under immense pressure from the government to cut interest rates to stimulate the slowing growth.

The Inflation is still above the comfort levels and cutting the interest rate could bolster it further. The IIP and WPI data are due on 14th January before the RBI Monetary policy review on 29th January 2013.

The Asian equity markets are trading mixed shares fell on Friday, tracking overnight weakness in global equities, but the dollar gained after several Federal Reserve officials expressed concerns about continuing to expand stimulative bond buying.

Minutes from the Fed's December policy meeting released on Thursday showed some voting members of the Federal Open Market Committee were increasingly concerned about the potential risks of the Fed's asset purchases on financial markets.

The jobless rate has fallen significantly over the past year. The Fed is still committed to keeping interest rates near zero until the unemployment rate hits 6.5% but if labour market conditions continue to improve, they may opt to curtail other programs.

The US 10 year Treasury yield rose to 1.90%, it was seen trading to its highest levels since May 2012. The Indian benchmark bond yield closed lower at 7.97 levels.

Outlook: Exporters were already asked cover partially around 55 plus levels, Importers should cover on dips around 54.20 - 54.40 levels. Overall: USD/INR Bullish

EURUSD: The Euro is currently lower at 1.3022 levels. The Euro dropped more than 1% against the U.S. dollar on the heels of the FOMC minutes.  Better than expected employment numbers out of Germany failed to lend support to the currency. The improvement was small with only 3K workers losing their jobs in the month of December compared to 5K in November. The unemployment rate held steady at 6.9%. The confidence has declined as retail sales hit its lowest level in 8 months according to Markit's Retail PMI report. Therefore unfavourable weather, competition and lower foot traffic could lead to a downside surprise in retail sales. On data front, German retail sales are scheduled for the day along with final Euro zone and German PMI services. Support is seen at 1.2950 levels while resistance is seen at 1.3119 levels.

GBP/USD: The Pound is trading weaker at 1.6067 levels against the US Dollar. The weaker than expected economic data and relatively broader strength drove the Pound lower against the US Dollar. The Housing price decline by 1% in the month of December according to Nationwide Building Society and Construction PMI came at 48.7 v/s the forecasted of 49.6 which added to the Pound weakness. The pair is expected to find a support near 1.6023 levels and the resistance is near 1.6155 levels. Overall in a range with bearish bias.

 USD/JPY: Yen continues to weaken against the dollar at is trading at 87.71 levels. With Japanese markets closed last night, no economic data was released from Japan. The expectations for drastic policy changes in Japan have driven yen weakness. The yen has lost 2% against the greenback in the five days, extending the longest losing streak since February 1989. Near term support is at 86.50 levels and the near term resistance is at 89.00 levels. Target of 84-85 levels achieved and  further target it to 90 levels.

AUD/USD: Australian dollar is trading  at 1.0438 levels against the US Dollar. The major currencies are trading weaker against the Greenback but the Australian Dollar is sticky to earlier levels on account of positive Chinese data. The Chinese Service PMI rose to 56.10 v/s 55.6 the month prior.  Near term support is seen at 1.0290 levels while immediate resistance is at 1.0588 levels.

 Gold: The gold is trading at $1649 per ounce dived 1.50%, poised the longest run of weekly losses since 2004. The FOMC minutes released yesterday showed the US FED members' willingness to end the asset purchases this year weighed on the precious metal. The pair is expected to find support at $1635 levels and resistance at $1675 levels.

 Oil: The WTI Crude is trading at $92.16 levels. The pair is expected to find support at $89.95 levels and resistance at $93.75 levels. Overall range bound.

DI: The Dollar is trading 5 weeks high at 80.63 levels. The U.S. dollar shot higher against all of the major currencies after the FOMC minutes revealed a debate over when to end asset purchases. The members of the monetary policy committee want to end asset purchases by the middle of this year, others want it to continue until year end while arguing for the program to continue beyond 2013. The Fed is still committed to keeping interest rates near zero until the unemployment rate hits 6.5% but if labor market conditions continue to improve, they may opt to curtail excessive printing. The Data released yesterday was mixed with ADP Non-Farm Employment Change expanding to 215Kwhile unemployment claim increased to 372K. The Non farm payroll, Unemployment Rate and ISM Non-Manufacturing PMI figures are due for the day. Strong near term support is seen at 79.60 levels and the resistance is seen at 81.45 levels. Overall the Dollar Index is bullish. 

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