Currency market
Rupee had bullish undertone within set intraday range of 53.35-53.85; sharply up from 53.83 to 53.47 before close at 53.55. The close below 53.60 despite strong undertone of the US dollar (against global currencies) is great comfort to the bulls. We continue to see the extended weakness into 53.60-54.30 as unreal, hence not to sustain and consider this extended weakness good for exporters to sell 1Y (and beyond) receivables. Let us watch immediate resistance at 53.35-53.20 now.
EUR/USD reversal from 1.2918 is losing steam above 1.3015 (high of 1.3023) but looks heavy for one more look at 1.2925-1.2900 support while 1.3045-1.3070 stays firm. It will be good to trade end-to-end with tight stop on conclusive break thereof.
USD/JPY rally from 79.70 is losing steam at first resistance at 80.20 ahead of set objective at 80.50-80.65. The underlying bullish undertone is valid till it stays above 80, else earlier support at 79.75-79.60 attracts. Let us watch 79.65-80.65 now; test/break either-way not expected to sustain.
Interest rate market
Bonds/OIS continue to stay tightly boxed at 8.12-8.15% (10Y Bond); 7.57-7.62% (1Y OIS) and 6.97-7.02% (5Y OIS) with good interest at both ends ahead of monetary policy. The expectation of lower break-out into 8.02%, 7.47% and 6.87% post-policy remains valid with worst case at 8.17%, 7.62% and 7.02%.
FX premium remained weak; steady at lower end (3M below 6.5%) and weak at longer end (12M down at 5.45%). Continue to watch 6.25-6.5% (3M) and 5.35-5.60% (12M) with bias into lower end. The strategy to receive 3M at 6.50-6.65% and 12M at 5.60-5.70% is valid.
Equity market
NIFTY was in consolidation mode at 5680-5730 (low of 5686 and high of 5719) before close at 5705; close above 5680-5700 provides good comfort for the bulls and strategic investors. The outlook is bullish on build-up of hope from RBI to deliver rate cut to signal shift into effective growth supportive stance. Despite weak DM bourses, liquidity flow to EM will keep NIFTY in bullish mode into near/short/medium term. Let us continue to watch strong support at 5680-5660 for eventual test/break of 5730-5750 into 5800-5830 in the near term.
Commodity market
NYMEX Crude in consolidation mode at 85.50-86.50; makes sense after sharp fall from over 93 to below 85. The intra-day correction into 86.50-87.50 (high of 86.62) did provide opportunity to add to “shorts”. We continue to watch gradual weakness into 82.50-81.50 to unwind short positions (with trail stop above 88). The range to watch for now is 82.50-86.50 with extension limited to 81-88.
Gold is consolidation mode at 1710-1720; makes sense after sharp fall from over 1795 to below 1700. The intra-day correction into 1720 (high of 1717) gave opportunity to reinstate “shorts” for eventual move into 1675-1660. The strategy is to hold “shorts” entered at 1710-1720 and add at 1730-1740 with tight stop for 1670.
Next update on 29th October 2012........................Moses Harding
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