Currency market:
FED's stance to keep interest rate low into 2014 has helped EUR/USD rally from low of 1.2929 to 1.3184. We looked for end-to-end move within 1.2900-1.3150. Now, we need ECB to push policy rate from current 1% close to zero to limit USD weakness. USD Index has also overshoot below the strong support zone of 79.50-79.30 (low of 79.07) driven by spike in EUR/USD and reversal in USD/JPY from 78.25 to 77.25. Now, the risk for EUR/USD to extend its gains into 1.3250-1.3300 while 1.3000-1.2950 stays firm. Let us watch 1.3000-1.3250 with overshoot limited to 1.2950-1.3300.
USD/JPY nicely traded end-to-end of 77.25-78.25 range (high of 78.28) and now looks set to extend its weakness into 76.50. The inability to hold on to its gains into 78.25 and reversal below 77.25 is bearish for this pair. Over all, we now watch 76.25-78.25 with test/break either-way to attract.
USD/INR has met the 49.75 obejctive (ahead of 49.60). All factors are now looking to be rupee bullish. The expectation is for consolidation at 49.60-49.90 with overshoot limited to 49.50-49.00. The risk for extension into 49.20-48.70 is valid at this stage
Interst Rate market
10Y bond yield fell from the high of 8.42% into 8.29% before consolidation around 8.35%. No change in view for looking at consolidation within 8.30-8.40% and overshoot either-way to attract. Strategy to stay invested on weakness above 8.40% is valid with near term objective at 8.20-8.15% by end March 2012.
1Y OIS rate is boxed at 8.0-8.15% range having rallied from low of 8.02% to current 8.14%. Continue to believe extension beyond 8.15% is not expected to sustain. 5Y OIS rate too rallied from 7.27% to 7.37% and now around 7.35%. Here again extension into 7.35-7.45% is difficult to sustain.
The rally in FX premium is losing steam above 9% in 3M and 6% in 12M. It is not prudent to stay paid around these levels. While exchange rate play is exerting upward pressure, we would need to see release of interest rate play to guide swift reversal. Till then, we watch 8.0-9.0% in 3M and 5.5-6.0% in 12M and stay prepared for reversal into the lower end and extended gains beyond the higher end not expected to sustain.
Equity market
NIFTY is slowly and steadily inching its way upwards to the set objective at 5350 ahead of 5500. Now we watch strong support at 5150-5100 to hold for this move. We watch 5150-5350 now.
Commodity market
Gold rallied post FOMC. We were looking for formation of strong support at 1650-1630 but the strong momentum from FED was good enough to take out 1680-1700 resistance.The rally from 1648 (from 1650-1630 support window) into 1729 was sharp. Now, we get the focus into 1800 while 1700-1680 stays firm.
NYMEX crude also rallied from low of 97.53 (buy zone of 98.50-97.50) into 101.30 (sell zone of 100.50-102.50) and now in consolidation mode around 100. Over all, the trades are boxed at the set near term range of 98-103. Let us continue to watch consolidation at this range and expect overshoot either-way not expected to sustain. The near term bias however is for overshoot into 105 which should fail.
Have a great day ahead...............Moses Harding
FED's stance to keep interest rate low into 2014 has helped EUR/USD rally from low of 1.2929 to 1.3184. We looked for end-to-end move within 1.2900-1.3150. Now, we need ECB to push policy rate from current 1% close to zero to limit USD weakness. USD Index has also overshoot below the strong support zone of 79.50-79.30 (low of 79.07) driven by spike in EUR/USD and reversal in USD/JPY from 78.25 to 77.25. Now, the risk for EUR/USD to extend its gains into 1.3250-1.3300 while 1.3000-1.2950 stays firm. Let us watch 1.3000-1.3250 with overshoot limited to 1.2950-1.3300.
USD/JPY nicely traded end-to-end of 77.25-78.25 range (high of 78.28) and now looks set to extend its weakness into 76.50. The inability to hold on to its gains into 78.25 and reversal below 77.25 is bearish for this pair. Over all, we now watch 76.25-78.25 with test/break either-way to attract.
USD/INR has met the 49.75 obejctive (ahead of 49.60). All factors are now looking to be rupee bullish. The expectation is for consolidation at 49.60-49.90 with overshoot limited to 49.50-49.00. The risk for extension into 49.20-48.70 is valid at this stage
Interst Rate market
10Y bond yield fell from the high of 8.42% into 8.29% before consolidation around 8.35%. No change in view for looking at consolidation within 8.30-8.40% and overshoot either-way to attract. Strategy to stay invested on weakness above 8.40% is valid with near term objective at 8.20-8.15% by end March 2012.
1Y OIS rate is boxed at 8.0-8.15% range having rallied from low of 8.02% to current 8.14%. Continue to believe extension beyond 8.15% is not expected to sustain. 5Y OIS rate too rallied from 7.27% to 7.37% and now around 7.35%. Here again extension into 7.35-7.45% is difficult to sustain.
The rally in FX premium is losing steam above 9% in 3M and 6% in 12M. It is not prudent to stay paid around these levels. While exchange rate play is exerting upward pressure, we would need to see release of interest rate play to guide swift reversal. Till then, we watch 8.0-9.0% in 3M and 5.5-6.0% in 12M and stay prepared for reversal into the lower end and extended gains beyond the higher end not expected to sustain.
Equity market
NIFTY is slowly and steadily inching its way upwards to the set objective at 5350 ahead of 5500. Now we watch strong support at 5150-5100 to hold for this move. We watch 5150-5350 now.
Commodity market
Gold rallied post FOMC. We were looking for formation of strong support at 1650-1630 but the strong momentum from FED was good enough to take out 1680-1700 resistance.The rally from 1648 (from 1650-1630 support window) into 1729 was sharp. Now, we get the focus into 1800 while 1700-1680 stays firm.
NYMEX crude also rallied from low of 97.53 (buy zone of 98.50-97.50) into 101.30 (sell zone of 100.50-102.50) and now in consolidation mode around 100. Over all, the trades are boxed at the set near term range of 98-103. Let us continue to watch consolidation at this range and expect overshoot either-way not expected to sustain. The near term bias however is for overshoot into 105 which should fail.
Have a great day ahead...............Moses Harding
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