Contents For the week ended 20 th Nov – 24th Nov 2017

DOMESTIC MARKET Dollar Rupee Forward Market

INTERNATIONAL MARKET Euro Pound Sterling Yen Gold Market

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Domestic Markets Weekly wrap up:

Domestic Market  Rupee closed the week at 64.6975 levels.  FX Reserves increased marginally to $399.53 bln as on Nov 17th from $399.29 bln

Rupee opened the week at 64.97 levels and initially weakened to 65.1275 levels - its weekly low- owing to Dollar buying by importers and negative sentiments in Asian equities. Also, the dollar strength globally coupled with political uncertainty in Germany kept rupee under pressure. However, the overall positive mood owing to rating upgrade by Moody’s last week supported the local unit. Recovery in Asian equities mid-week helped rupee to gain further. Rupee was further supported by global dollar weakness after the release of Fed’s minutes of meeting. Minutes of the US Fed Meeting showed that some members were worried about persistently low inflation though they hoped that planned corporate tax cuts would spur the growth. The December rate hike seemed on the card but the pace of future rate hikes seemed slow. This led rupee to strengthen sharply below 64.60 levels. Also, Indian markets were buzzing rumors’ of S&P’s announcement of India’s rating upgrade which helped rupee to hit its weekly high of 64.545 levels. Rupee retraced some of its gains ahead of the weekend to close the week at 64.6975 levels.

For the week 27th Nov – 01st Dec 2017

Going Forward: Rupee is likely to open the week around 64.55-64.60 levels. The Euphoria surrounding the S&P’s announcement shall play on investor’s minds. Standard & Poor’s (S&P) on Friday kept its sovereign rating for India unchanged at 'BBB-', while keeping its outlook for the nation stable. The move is likely to disappoint investors, who pushed the BSE Sensex for the seventh consecutive trading session on Friday on hopes of another rating upgrade. S&P said India’s sizable fiscal deficit, low per capita income and high government debt detract from sovereign credit profile, adding that the fiscal gap was in line with expectations. The global rating agency, however, expects the Indian economy to grow robustly over 2018-2020 having a favourable view of the reforms that the government has undertaken and lauded India’s fiscal consolidation drive. Though the rating was unchanged but the positive comments from S&P shall help the sentiments. Globally too, the US dollar weakened sharply over the weekly closing against major Currencies especially Euro. This shall help rupee to stay strong and target levels towards 64.40. Traders shall stay cautious ahead of GDP data for third quarter on 30 November. According to Bloomberg analyst estimates, gross value added (GVA) will be at 6.3% from 5.6% a quarter ago, while GDP will be at 6.5% from 5.7% last quarter. If GDP hits the markets estimates, rupee could further strengthen towards 64.20 levels towards the end of the week. However, Debt markets have started witnessing some FII outflows though small, which shall limit sharp gains in the Indian currency. Also, month end dollar demand from Oil importers and possible RBI intervention to curb sharp gains shall push rupee back towards 64.80 and higher levels. Overall, the Indian currency could trade in a range of 64.20-65.00 levels tracking movements in Indian bond markets and major cross currencies. The release of GDP numbers in the week shall also remain key for the rupee movement.

Advise: Exporters are advised to hedge their short to mid-term exports on spikes towards 64.9065.00 levels and wait for longer term export receivables. Importers are advised to cover their very near term payable on dips towards 64.40 levels.


Forward Market 6 - month Premium (in Paisa)

Domestic Market Likely to move lower

6 month forward premia opened the week at 144.25 paisa and briefly appreciated to 144.50 paisa. Given a bearish close it started to move lower and breached its key support of 142.00 paisa. 6 month forward premia dipped to a low of 139.00 paisa and ended the week at 141.50 paisa. . Going Forward: 6 month forward premia has given a beaish close on the short term charts signalling an downmove towards 140.00 paisa. A convincing break and close below the same shall push it to 138.50 and 131.50 paisa. On the upside, key resistance lies at 148.50 paisa. Technical indicators are signalling a bearish momentum. Key Support: 140.00, 138.50, 131.50 Key Resistance: 148.50, 153.00, 155.00


EUR/USD Euro closed the week at 1.1930 levels.

Euro: Euro opened the week at 1.1789 levels and initially spiked to 1.1800 levels on back of better than expected German PPI numbers. However, Euro pared its earlier gains and dipped to weekly low of 1.1712 levels as German Chancellor Angela Merkel failed to form a coalition government with Greens and pro-business Free Democrats coupled-with rise in US Home sales numbers. Later in the week, Euro bounced back above 1.1800 levels on mixed US Data coupled-with rise in the Euro-Zone's Consumer confidence number. Further, minutes of US fed meeting indicated that some members were worried about persistently low inflation coupled-with rise in Euro-Zone's flash Manufacturing and Services PMI number helped Euro to trade above 1.1850 levels. Towards the end of the week, Euro traded initially in a narrow range as minutes of ECB meeting highlighted solid growth but low inflation. On the last trading day of the week, Euro rallied against the Dollar as the latest EU Purchasing Managers' Index (PMI) and German IFO business climate hitting multi year highs suggested the upturn still has momentum. Also, the developments in Germany, where the Social Democrats (SPD) appear close to dropping their opposition to renewing cooperation with Chancellor Angela Merkel, was giving some added support to the euro. Euro rose to hit its weekly high of 1.1944 levels before closing the week at 1.1930 levels.

Technical

Technical Outlook:

International Markets

Likely to move higher

Upcoming Events        

GfK Consumer Climate (DE) Prelim CPI m/m (DE) Retail Sales m/m (DE) Unemployment Change (DE) ECB Financial Stability Review (EU) Unemployment Rate (EU) Final Manufacturing PMI (DE) Final Manufacturing PMI (EU)

Week ahead: Cross has given an extremely bullish close on the short term charts signalling continuation of the upmove towards 1.2030 and 1.2090 levels. A convincing break and close above the same shall push it to 1.2200 and 1.2330 levels. On the downside, key support lies at 1.1860 and 1.1730 levels. Technical indicators are signalling a bullish momentum. Key Support: 1.1860, 1.1730, 1.1640 Key Resistance: 1.2030, 1.2090, 1.2200 Advise: Exporters are advised to cover their near term receivables in a staggered manner on spikes towards 1.2080 and 1.2200 levels. Importers are advised to cover their near term payables on dips towards 1.1850 levels.


International Markets GBP/USD GBP closed the week at 1.3335 levels.

Technical

Sterling: The British currency started the week on a flat note at 1.3216 levels. Due to lack of important economic events from the nation, investors focused their attention to the recent Brexit negotiation meeting which ended on a good note. However, the uncertainty surrounding Angela Merkel’s political situation played with the investors mind and restricted gains as markets believed that it could hinder with the negotiations. This hindrance was well acknowledged by the UK Chancellor in the mid-week Budget. He cut Britain's growth forecast rate for the coming years till 2022 which created a temporary drag on the Pound currency. Losses were capped thereafter due to the release of FOMC Meeting Minutes that was mostly dovish. Minutes of US fed meeting indicated that some members were worried about persistently low inflation, which could hinder the pace of future interest rate hikes. This induced weakness in the dollar across the currency spectrum and helped the Sterling to move higher. Also, the UK cabinet's plan to increase the money on offer to the European Union in their financial settlement on exiting the Union acted as a positive factor pushing the pound higher at 1.3359 levels. Markets believed that this kind of progress could push the negotiations forward. GBP/USD ended the week higher at 1.3335 levels. Technical Outlook:

Likely to move higher

Upcoming Events     

BOE Financial Stability Report Nationwide HPI m/m Bank Stress Test Results GfK Consumer Confidence Manufacturing PMI

Week ahead: Cross has given a bullish close on the short term charts signaling continuation of the upmove towards 1.3400 levels. A convincing break and close above the same shall push it to 1.3520 and 1.3650 levels. On the downside, key support lies at 1.3265 and 1.3120 levels. Technical indicators are signalling the same bullish momentum. Key Support: 1.3265, 1.3120, 1.3030 Key Resistance: 1.3400, 1.3520, 1.3650 Advise: Importers are advised to cover their near term payables on dips towards 1.3265 levels. Exporters are advised to cover their near term receivables on spikes towards 1.3500 levels.


USD/JPY Yen closed the week at 111.53 levels.

Japanese Yen: The Japanese currency opened the week flat at 112.08 levels and briefly appreciated to 111.87 levels on the release of better than expected Trade Balance Data. The data showed that Japan’s adjusted merchandise trade surplus unexpectedly widened to ¥322.9 billion in October, against market consensus for a decline to ¥206.7 billion. However, the currency pair got supported sub 112.00 levels and Yen started weakening against the US dollar. The CB Leading Index data in the US printed a good reading of 1.20% against the expected 0.60% sending the Yen to its weekly low of 112.72 levels. Further, subdued All Industry activity numbers in the Japan coupled with better than expected US Existing Home sales kept the Yen on a weaker note. During the mid-week, flat Durable Goods data in the US supported the Yen to gain some lost ground. The unemployment claim numbers also printed a lower than expected reading enabling the Yen to appreciate towards 111.13 levels. The US Fed meeting minutes suggested few members still expressed their concern over the poor inflation, which in turn can hinder the future rate hikes. The US dollar did very little against the Japanese yen, as American celebrated Thanksgiving the Yen remained on a firm note and hit a weekly high of 111.05 levels. Towards the end of the week, good reading of manufacturing data in Japan kept the Yen on a positive note to end the week at 111.53 levels.

Technical

Technical Outlook:

International Markets

Likely to move lower

Upcoming Events          

SPPI y/y Retail Sales y/y Prelim Industrial Production m/m Housing Starts y/y Household Spending y/y National Core CPI y/y Tokyo Core CPI y/y Unemployment Rate Capital Spending q/y Final Manufacturing PMI

Week ahead: The pair has given a bullish close on the daily charts while has given a bearish close on the weekly charts signalling an upmove initially towards 112.00 levels. Facing resistance at these levels, the pair is expected to retrace back lower towards 111.00 and 110.00 levels. A convincing break and close below the same shall open up the gateway for a swift downmove towards 109.40 and 108.25 levels. Technical indicators are mixed. Key Support: 111.00, 110.00, 109.40 Key Resistance: 112.00, 113.00, 114.80 Advise: Importers are advised to cover their near term payables on spikes towards 112.00 levels. Exporters are advised to sell their near term receivables on dips towards 110.00 levels.


Gold

International Market Likely to move lower

Week Gone by: Gold opened the week at 1292.62 levels and blipped marginally towards 1294.73 levels. Given a bearish close on the short-term charts, it started to move lower and touched a low of 1274.86 levels. Taking support at these levels, the yellow metal started to move higher and ended the week at 1287.83 levels. Week Ahead: The yellow metal has given a bearish close on the short term charts signaling an downmove towards 1273.00 levels (trendline support). A convincing break and close below the same shall push it to 1262.00 and 1245.00 levels. Further support lies at 1220.00 and 1200.00 levels. On the upside, key resistance lies at 1315.00 and 1335.00 levels. Technical indicators are signaling a bearish momentum. Key Support: 1273.00, 1262.00, 1245.00 Key Resistance: 1315.00, 1335.00, 1358.00 Advise: Short term traders are advised to sell the yellow metal on spikes towards 1290.00 levels targeting 1275.00 and trail profits for 1263.00 levels while keeping a strict stop loss above 1295.00 levels.


Forex Calendar Date

Forex Calendar

Time

Country

Data

Forecast

Previous

27/11/2017

05:20

JP

SPPI y/y

0.9%

0.9%

27/11/2017

20:30

US

New Home Sales

627K

667K

28/11/2017

12:30

UK

BOE Financial Stability Report

-

-

28/11/2017

-

UK

Nationwide HPI m/m

0.2%

0.2%

28/11/2017

-

UK

Bank Stress Test Results

-

-

28/11/2017

17:30

DE

GfK Consumer Climate

10.8

10.7

28/11/2017

19:00

US

Goods Trade Balance

-65.0B

-64.1B

28/11/2017

19:30

US

HPI m/m

0.6%

0.7%

28/11/2017

20:30

US

CB Consumer Confidence

123.9

125.9

29/11/2017

05:20

JP

Retail Sales y/y

0.1%

2.3%

29/11/2017

-

DE

Prelim CPI m/m

0.3%

0.0%

29/11/2017

19:00

US

Prelim GDP q/q

3.3%

3.0%

29/11/2017

20:30

US

Pending Home Sales m/m

1.1%

0.0%

30/11/2017

00:30

US

Beige Book

30/11/2017

05:20

JP

Prelim Industrial Production m/m

1.9%

-1.0%

30/11/2017

5:31

UK

GfK Consumer Confidence

-9

-10

30/11/2017

10:30

JP

Housing Starts y/y

-2.6%

-2.9%

30/11/2017

12:30

DE

Retail Sales m/m

0.3%

0.5%


Forex Calendar

30/11/2017

14:25

DE

Unemployment Change

-10K

-11K

30/11/2017

-

EU

ECB Financial Stability Review

-

-

30/11/2017

15:30

EU

Unemployment Rate

8.9%

8.9%

30/11/2017

19:00

US

Initial Jobless Claims

241K

239K

30/11/2017

19:00

US

Core PCE Price Index m/m

0.2%

0.1%

30/11/2017

19:00

US

Personal Spending m/m

0.2%

1.0%

30/11/2017

19:00

US

Personal Income m/m

0.3%

0.4%

01/12/2017

05:00

JP

Household Spending y/y

-0.2%

-0.3%

01/12/2017

05:00

JP

National Core CPI y/y

0.8%

0.7%

01/12/2017

05:00

JP

Tokyo Core CPI y/y

0.6%

0.6%

01/12/2017

05:00

JP

Unemployment Rate

2.8%

2.8%

01/12/2017

05:20

JP

Capital Spending q/y

3.3%

1.5%

01/12/2017

06:00

JP

Final Manufacturing PMI

53.8

53.8

01/12/2017

14:25

DE


62.5

62.5

01/12/2017

14:30

EU


60.0

60.0

01/12/2017

15:00

UK

Manufacturing PMI

56.6

56.3

01/12/2017

20:15

US


53.8

53.8

01/12/2017

20:30

US

ISM Manufacturing PMI

58.4

58.7


Fed Signals December Hike Even as Debate on Prices Persists Column of the Week

 Another increase ‘was likely to be warranted in the near term’  Meeting minutes also show concerns about financial imbalances Federal Reserve officials meeting earlier this month saw an interest-rate increase in the near term even as tepid inflation drove divisions over the policy path and as financial stability concerns cropped up. “Many participants thought that another increase in the target range for the federal funds rate was likely to be warranted in the near term if incoming information left the medium-term outlook broadly unchanged,” according to minutes from their Oct. 31-Nov. 1 gathering, released in Washington on Wednesday. Policy makers held rates steady at the meeting but are expected to hike next month as they continue with gradual tightening. Unemployment is at a 16-year low, although inflation remains well beneath their 2 percent target. The minutes showed that while Fed officials remain confident in the labor market and above-trend economic growth, several are looking for stronger signs that price gains will pick up. A few even want to see inflation on an upward path before lifting rates again, underlining a persistent divide on the policy-setting Federal Open Market Committee. Stocks stayed lower, the dollar declined and yields on two-year Treasury notes dipped after the minutes were released. With a December Fed rate hike almost fully priced in, market-implied odds of another rate increase by March held around 55 percent, based on trading in federal funds futures. Officials have been projecting three rate increases in 2018, but that outlook could be called into question if economic data fail to meet Fed expectations. Analysts are watching closely for any signal that central-bank officials will mark down their outlooks when they submit economic projections at their Dec. 12-13 meeting.

‘Well Telegraphed’ “It was pretty well telegraphed that December is a done deal,” said Omair Sharif, senior U.S. economist at Societe Generale in New York. “There’s really nothing in these minutes that tells you that the path for rate hikes will be different than what it looked like coming out of the September meeting. No one is jumping from one camp to another, they’re just digging in a bit more.”


Inflation has averaged 1.6 percent so far this year after stripping out volatile food and fuel, and it came in at just 1.3 percent in September, stubbornly below the Fed’s goal. Many participants observed that low inflation “might reflect not only transitory factors, but also the influence of developments that could prove more persistent,” according to the minutes. On the other hand, a few said there could be “increasing upside risks” to inflation as the labor market continues to tighten. Even as inflation baffles policy makers, they are on the lookout for asset bubbles after a long period of low interest rates. Several participants “expressed concerns about a potential buildup of financial imbalances,” adding that a sharp reversal in asset prices could hurt the economy, according to the minutes.

Several participants said businesses seemed to be more inclined to invest, and “it was noted” that tax reform could boost capital expenditures. A few said the prospects for “significant” tax cuts had improved. The meeting concluded a day before President Donald Trump announced he had picked Governor Jerome Powell to replace Janet Yellen when her term as chair ends in February. This was the first meeting that former Fed Vice Chairman Stanley Fischer didn’t attend since announcing his retirement.

Source: Bloomberg


Graph’o’nomics


Graph’o’nomics

Disclaimer: While care has been taken in compiling this publication, Greenback Advisory Services Pvt. Ltd, is unable to take any liability for the accuracy of its contents or any consequences of any reliance which might be placed on it. Risk Disclosure: Any information presented by Greenback Advisory Services Pvt. Ltd should be in no way understood as an offer, promise or guarantee for receiving a profit or avoiding the losses. Stated here levels of support and resistance must not be construed as an investment advice or endorsement for any financial instrument. There exists no guarantee that the market would behave in accordance with the information stated here Prepared by Greenback Advisory Services Pvt. Ltd.
