Premium trade recommendations for 24-31 December 2011
USD/INR:
Rupee has nicely traded end-to-end of 52.50-53.25 (set near term trading range) and bias is for extended gains into 52.00 in due course. We are short in spot USD/INR at average of 53.00 (current 52.70) and also short March 2012 dollars at average of 54.35 (current 53.75). Let us watch profit target at 52.10 (for spot USD/INR) and 53.35 (March 2012 dollars) with stop at cost. For now, watch consolidation at 52.35-52.85 with overshoot limited to 52.00-53.00. It is good for exporters to sell 3M dollars above 54.00 while importers stay away for move into 52-51 in due course.
EUR/USD and USD/JPY:
EUR/USD is in end-to-end trade between set near term range of 1.2950-1.3200 (low of 1.2980 and high of 1.3197). We recommended to sell in two lots at 1.3075 and 1.3175 (with stop above 1.3225) and advised not to stay “long EUR/USD” below 1.3000. Over all, it was a 150 pip trade between 1.3130 to 1.2990 and 1.3195 to 1.3015. Now, let us watch consolidation at 1.2850-1.3250. Trade recommendation is to buy at 1.2950-1.2850 (with stop at 1.2825) and sell at 1.3150-1.3250 (with stop at 1.3275).
USD/JPY is in tight consolidation mode at 77.50-78.25 (low of 77.66 and high of 78.22). We are already “long” at 77.75 (current at 78.10). Let us continue to hold with strategy to add at 77.25 (with stop below 77.00) for profit at 78.75/79.50.
Bond/OIS:
The rally in 10Y bond lost steam on extension below 8.30% for reversal into 8.40%. Let us watch consolidation at 8.30-8.45%. The strategy is to buy weakness into 8.40-8.50% for 8.30-8.25%. Over all, set short term range of 8.25-8.50% is there to stay till RBI gets into rate reversal mode.
1Y OIS rate found solid support at lower end of set near term range of 7.65-7.80% for sharp reversal (low of 7.65 and high of 7.77) while 5Y rose sharply from low of 6.82% into 6.98%. We are now paid in 5Y OIS at average 6.87% (current 6.98%). The “carry” is very attractive for this trade with overnight MIBOR above 9.75%. Let us watch stop at cost and t/p at 7.05-7.10%. We will “unlock” this “carry” through 1Y received book of 7.85-7.90% (for 1% 1X5 spread).
NIFTY:
The initial weakness below strong support window of 4675-4725 failed at 4531 for sharp recovery into the sell window of 4750-4850 (high at 4763). Now, we are short at 4750; strategy is to sell next lot at 4850 (with stop at 4875) for profit at 4550-4525. Let us continue to watch short term play at 4350-4850. Strategic investors can add the first lot (one-third of the appetite) at 4550; second one at 4400 and final one at 4250 (with stop below 4200) for reversal into 5250-5350.
Gold and NYMEX Crude:
The sharp reversal in USD Index from 80.80 to below 79.80 pushed commodity prices up with Gold moving up to high of 1641 and NYMEX crude into 100.10; thus taking out our stop at 1620 and 98.5 respectively. NYMEX crude has however moved to expectations of finding good support in our earlier buy zone of 95-92 and sell zone of 100-103. Let us watch consolidation in Gold at 1580-1640 and NYMEX crude at 95-103 while having a close watch on USD/Index at 78.50-81.00. No trade at this stage.
Wish you all a merry Christmas and very happy New Year.....
Moses Harding
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