MARKET PULSE: 20th March 2012
Currency market
USD/INR is tightly boxed within 50.05-50.30 right at the middle of set near term range of 49.80-50.65. The downward pressure on the EUR/USD and usual month end dollar demand provides good support for the pair at 50.05-50.00 considered as strong support ahead of the lower end of set short term range of 49.80-50.80. The triggers for the rupee bears are from weak stock market; strong USD against major currencies and usual month/year-end dollar demand. However, there is comfort (for rupee bulls) from good dollar supplies in the forward market and loss of bullish momentum in crude oil price. Let us track consolidation in USD Index at 79.50-80.50 (within 79-81) and prefer USD/INR to find stability at 50.00-50.35 with overshoot limited to 49.85-50.50. The strategy for the day is to sell December 2012 dollars at 53.00-53.10 (spot at 50.35-50.50) and buy April 2012 dollars at 50.50-50.40 (spot at 50.00-49.85).
FX premium tightly boxed around set resistance of 8.5% in 3M/June 2012) and 6.5% in (12M/February 2013) and reversal from there is also shallow despite favourable exchange rate play. The high term money rates continue to provide strong support. The near term outlook (on shift into FY13) of sharp reversal into 8.0% (3M) and 6.0% (12M) continues to stay valid. For now, let us watch 3M at 8.15-8.65% and 6.15-6.65% in 12M. The strategy is to receive 3M at 8.50-8.65% and 12M at 6.50-6.65% for immediate objective at 8.15-8.0% and 6.15-6.0% respectively.
EUR/USD rallied into the sell window of 1.3250-1.3300 (high of 1.3264) and in consolidation mode around 1.3225. The ability to hold above minor support at 1.3150-1.3120 and lack of momentum in reversal from the set sell zone puts the dollar bulls at the back foot. Let us now watch consolidation at 1.3150-1.3300 and consider test/break either-way not expected to sustain. Continue to stay “short” with stop loss above 1.3325 for 100 pip profit. At this stage, EUR/USD is set to stay steady at 1.30-1.33 till fresh cues come in to guide directional break-out.
Bond/OIS market
Bond/OIS market is under pressure but traded steady above 8.40% (10Y bond); 8.20% (1Y OIS) and 7.60% (5Y OIS). The next trigger will be from FY13 auction calendar and trending in IIP/WPI numbers. The supply side concerns are back into focus and it would need continuation of OMO or delivery of rate cut to release pressure both on Bond and OIS market. For now, let us watch 10Y bond at 8.35-8.45%; 1Y OIS at 8.15-8.25% and 5Y OIS at 7.55-7.70%. The bias is for gradual move into higher end while test/break of lower end is not expected to sustain. The strategy is to receive 1Y OIS at 8.25-8.30%; pay 5Y OIS at 7.55-7.50% and sell 10Y bond at 8.37-8.34%.
Equity market
NIFTY is in the process of gradual move into the lower end of set weekly range of 5075-5400 and fell 100 points from high of 5340 to 5238 before close at 5257. The focus is back into strong support at 5175 followed by 5080 while 5300-5325 stays solid. For now, let us watch 5175-5325 for bias into lower end; thereafter should gain momentum for quick push into 5080. The strategy is to trade from “short” side while strategic investors to await extended weakness into 5075-4950.
Have a great day.....................Moses Harding
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