EUR USD Touching New Lows

The Euro Continued to decline against the USD making new 4 yr low touching 1.2113. Though there were no much movement on Bank holiday in the U.K. and Memorial Day holiday in the U.S on Monday, however on Tuesday the EUR was quite volatile. On Tuesday the EUR touched the low of 1.2113 and recovered again to 1.2352 and now is currently trading at 1.2223. Last week ECB President Trichet called the euro a “credible currency” and said it is keeping value in “remarkable fashion”. Data released in the euro zone on Monday saw the Europe’s May business climate indicator improve to 0.34 from the prior reading of 0.28 while May industrial confidence improved to -6. May consumer confidence was unchanged at -18 and May economic confidence dropped to 98.4. May services confidence fell to +3 from +6 and the May consumer price inflation estimate was up 1.6%. In the US news, the ISM Manufacturing Index grew at a faster pace at 59.7 from the expected figure of 59.3 but lower than the April figure of 60.4. The decline can be attributed from the current decline from the stalled European growth and slowdown in Chinese economy.

From the technical view, the trend line (in red) is much steeper which shows the current short term view is bearish. There has been three declining movements and the euro mode being more bearish fundamentally there could be further declines seen in the days ahead. In the coming week, the ISM non-manufacturing data for the US and retail sales data for the EUR can be important data which can determine the volatility in the highly traded pair.
Mohammed Rabbani

EUR/AUD crosses remains under pressure touching life low

The EUR has been suffering for a while now against all other majors, with no different story with the AUD pair. The Greece sovereign debt crisis couldn’t spare the cross, making it to life low at below 1.4000. The $1trillion package manages to keep the financial markets on the positive side however did not attract investors to the EUR currency. This was primarily due to growing concerns for the Euro zone contributors like Portugal and Spain.

Last week’s Reserve bank of Australia (RBA) decision raised the benchmark interest rate from 4.25% to 4.5% to keep its inflation figures under control. The Australian economy as such has been suffering from the surging commodity prices; hence the measure to increase the cash rate was in expected lines of the market. The Australian Retail sales for March rose by 0.3% which was below half of the expected figure of 0.8%. This could be merely due to the tightening policy of RBA, which has been raising rates for sixth consecutive time. The major impact was brought to the pair with Australian employment change which got accelerated by creating 33700 jobs against the expected figure of 27000 jobs. Australia’s Treasurer Wayne Swan also imparted confidence that the economy is in a better position to deal with European deficit crisis. Though the pair may not be a highly traded among the traders, the pair is making muted lows touching 1.4000 and below.

From the technical perspective, the pair is trading at Relative Strength Index (RSI) 30 which indicates the oversold position for EUR. There is no immense news coming in favor of the Euro zone, until then the EUR would continue to depreciate making new lows. Investors should be cautious on the pair as we could see further downside if it crosses the 30% of the RSI mark. Mohammed Rabbani

Euro plunges on the Greece rescue package

The EUR plunged against the USD on the announcement of European Union’s (EU) $1 Trillion rescue package. The deal has been sealed with 500 Billion Euro’s loan package from the EU and 250 billion Euro’s IMF. The deal managed to applaud the global markets as such, but did not lure the EUR currency which plunged from the day’s high of 1.3090 to low of 1.2672. Even though the Euro zone has rescued Greece from the debts problems, there has been the concern of new issues prop up from Euro zone countries like Portugal and Spain. There has been many unanswered question on the minds of smaller countries managing their deficit gaps. Also the macro data of German retail sales fell -2.4% from the last month’s increase of 1.1% was unfavorable for the EUR currency

On the other a hand, after the collapse story of Lehman Brother, the US recovery seems to be on track with the Institute of Supply Management index rose from 59.6 to 60.4 versus the forecast of 60. Also the pending home sales data has been supportive for the US Dollar which rose by 5.3% from the expected figure of 3.9%. The Non-Farm employment released last week for the month of grew fastest in four years where employers added 290,000 jobs from the expected number of 198,000. Also the ADP Non Farm Employment also added 32,000 jobs which is the most number of jobs since Jan 2008 which was in favor of USD.

From the technical perspective, the EUR is trading below the 23.6% of the upward movement from the 100% of the Fibo level which shows the EUR to be on a bearish mode. On the other hand the EUR is nearing the 30% level of the Relative Strength Index (RSI) which seems to be oversold and after crossing the 30% level of RSI, there can be a bounce back expected. The near term support can be placed at 1.2448 on the downside and on the upward trend, there can be a bounce back from 1.3090 which seems to be a strong resistance level. However, in days to come, the EUR looks to be more on the downtrend, unless European nations like Portugal and Spain do not give a comprehensible roadmap for their fiscal deficits they would be facing in coming months ahead.

Mohammed Rabbani

AUDUSD choppy for the month

The AUDUSD pair has been extremely volatile for the month of April making the 18 months high for the month. AUD started rising at 0.9150 for the month reached at the high of 0.9386 (18 Month’s High) currently trading at 0.9386. This month’s Reserve Bank of Australia (RBA) decision to increase the rate hike to combat the inflation was in expected lines for the AUD. The contribution to the volatility was the Goldman Sachs storm which had an impact on the currency pair inline with other majors. On the other hand the Australia’s Westpac’s leading economic indicator rose highest in 1 //2 years from 0.4% to expected figure of 0.5%. The Australian Producer’s price Index which is a leading indicator of Consumer Inflation was expected at 0.7% but came out at 1% from the previous figure of -0.4%. The Australian Central bank’s Governor Glenn Stevens indication on interest rate hike could be on the cards which could be worrisome for the inflation ridden economy. But the RBA’s confidence on the strong Asian partner China, which is the largest importer of its mining activities could boost further trading activities for the economy.

From the technical perspective, the pair seems to be nearing the support with Relative Strength Index (RSI) approaching 30 and could be good point of comeback for the pair. On the Fibonacci level’s it has currently been trading at more than 50.00% of the upward movement, if it breaks the 61.8% level 0.9222, there could be further downside in the pair with next support at .098162. The Australian Consumer Price Index, New Home Sales data and the Private Sector Credit could determine the further move for the currency pair.

Mohammed Rabbani

AUD recovers after a correction against the USD

The AUD slipped against the US Dollar from the 4 month high since Nov 2009. The drop was driven by the government home loans data which fell more that expected falling to 1.8% from previous figure of 7.3%. The Reserve Bank of Australia (RBA) also raised the interest Cash Rate for the fifth consecutive time from 4% to 4.25%. The rate hike was not a surprise for the investors, however, this the rate is building pressure on the first time home buyers. The RBA rate hike has been a measure to control inflation. The increase in demand for the Australian minerals like coal and iron ore can also play a positive role in Australia’s growth strategy. The Australian unemployment rates were also inline with the markets expectations at 5.3% without change to the previous figures. The rise in dollar rate can also be attributed to the stable addition of jobs which supplemented to 19,600K but could not upbeat the market expectation which was at 20,100.

From the Technical point of view, the AUD has covered 61.8 % of the upward movement since Monday’s fall from 0.9386 against the US dollar. On the near term if it breaks the resistance at 0.9370, the further resistance could be at 0.9402. The downside support could be at 0.9214. As the week does not bring major fundamental news for the AUD, the building permits data for the USD could have some impact on the Australian dollar.

Mohammed Rabbani

Oil steady at 18 months high

Oil prices rose to 18 months high touching $86.30 for the day. The US Institute for Supply Management’s Index of Non-Manufacturing businesses rose to 55.4 from the expected figure of 54.1. The pending home sales for the month also jumped to 8.2% from the expected figure of -0.5% which shows clear sign of US recovery. The US Consumer Confidence Index also rose from 46.4 to 52.5 beyond the expectation of 50.1 which infuses the confidence of more consumption of petroleum products. The indicators reflect the revival taking place in the US economy.

The ADP Non-Farm Employment figure Shed 23000 jobs whereas it was expected to gain 40000 jobs for the month of march which is again concern for the US recovery. The initial jobless claims also decreased by 6000 from 445,000 to 439,000 beating expectation which was at 440,000. On Friday, the US Labor Department said employers had created 162,000 new jobs in March, the highest monthly number since March 2007 which again a positive news for the US economy.

The recent indicators reflect the steady and more positive recovery coming for the global economy which can improve the oil consumptions. The US crude oil inventories also showed a sharp fall from 7.3m barrels to 2.9m barrels however above expectation of 2.4m Barrels. Other reasons for the commodities price rise is the European Union’s bailout plan for Greece which again can boost consumption overall. The Weak dollar is also contributing towards the commodity price rise.

From the technical point of view, it has broken the resistance of 82.84. The next resistance can be at 92.15 as it has crossed the 38% of the upward movement. On the downside the 75.03 can be the support for the month, if it goes below then support can be placed at its can go up to 70.83.The US Crude oil inventory data and the unemployment data to be released today should be watched out which could direction on the rising oil prices. The Monetary Policy Committee (MPC) and the Bank of England’s (BOE) Interest rate statement for GBP which is expected to boost the GBP currency can also be a gain for the overall consumption.

Mohammed Rabbani

Nifty touches 5300 and sees a correction

The Nifty peaked to 52 week high Monday to 5329 and yesterday corrected 40 points closing at 5262.45. The European rescue plan for Greece which issued seven year bond on a higher market rate was one of the major reasons for the yesterday’s gains around the markets including Asia. However today’s drop in NSE Nifty was due to the profit booking in technology, pharma, telecom, banking & financial, auto counters.

HCL Tech, HDFC Bank lost more than 3% yesterday, Ambuja Cement, Sun Pharma, Garsim, and Hero Honda lost more than 2% from Mondays close. On the other hand there was major buying happening DLF and TATA motors which was up 3.23% and 2.23% respectively. IT stocks continued to struggle, IT companies which is major contributor to India50 index lost nearly 2.53%. The appreciation of rupee which is at a 19 months low at 45 against the US Dollar was also building pressure on IT companies. Though the nifty closed in red losing 0.76% from Mondays close, Asian indices were in the green zone. Shanghai composite gained 0.65% closing at 21,374.79 and Nikkei gained 1.01% closing at 11,097.14.

Thought the psychological level of 5300 has been broken and closed below for the day; the bullish outlook of the India Inc could hit the peak of 5350 in near term. With earning season in coming weeks, the nifty is at very crucial level facing resistance at 5350 in the near term and support at 5183. The support level could be a crucial level to watch as it has seen an upside twice from these levels. This NSE nifty futures expiry can bring some more correction happening for the week. IT could be sectors to watch for which can affect the Nifty in near term.

Mohammed Rabbani