Friday, 27 May 2016

Dollar/Rupee and dollar index down slightly ahead of Fed Yellen speech, mixed US econ data

Dollar/Rupee and dollar index down slightly ahead of Fed Yellen speech, mixed US econ data

Dollar/rupee and the dollar index traded down for the second straight session Friday as investors took profits ahead of key commentary from the Federal Reserve Chairwoman Janet Yellen amid mixed outlook on the world's largest economy.

Technical, USDINR extended its recent downside move for second consecutive day and settled at 67.1725.  Since 24 May 2016 pair retraced about 1.06% from the 67.8650 levels. On the Daily chart, pair broke its 23.8% Fibonacci Retracement support and formed a long bearish candle stick, both of which are indicating for further correction in near Future.

Today, any rise towards 67.65-67.70 is expect to attract selling activities for the target 67.35-67.15. Stop loss above 67.88.

On the other hand, a break above 67.90 only expect to give further upside move towards 68.08-68.25.

Data Update - The mixed performance from US has dented expectations for a Federal Reserve interest rate increase in June or July.

US initial jobless claims, the number of Americans applying for unemployment checks, which serves as a proxy for layoffs, decreased for the second straight week ended May 21, according to a report released by the Labour Department on Thursday.

US unemployment benefits fell to 2,68,000, a decrease of 10,000 from the previous week's unrevised level of 278,000. Economists had expected claims to fall to 275,000.

US pending home sales rose 5.1% to 116.3 in the month of April after climbing by 1.6% to an upwardly revised 110.7 in the month of March. Economists had expected the index to increase by just 0.8%.

US durable goods orders shot up by 3.4% in April after climbing by an upwardly revised 1.9% a month ago. Economists had expected orders to rise by just 0.3% compared to the 0.8% increase that had been reported for the previous month.

The Kansas City Fed's manufacturing composite index remained negative at -5 in May, largely unchanged from April's -4 or the -6 in March. Any result below zero represents a contraction.
Federal Reserve Board governor Jerome Powell said Thursday it may be appropriate for the Fed to raise interest rates again "fairly soon," but said the Fed should proceed at a gradual pace.

Powell said he expects to see further improvement in the labor market, including strong job gains and increases in wage inflation, in a speech at the Peterson Institute for International Economics. He anticipates inflation will move toward the Fed's 2% goal as the economy tightens.

Euro traded up for second-straight day Thursday after Euro zone finance ministers agreed to disburse new bailout loans to Greece.

Dollar traded lower against its major rivals Thursday after a major breakthrough in talks between Eurozone finance ministers and Greece to unlock 10.3 billion euros in new bailout loans.
Greece's creditors agreed early Wednesday to release the next tranche of bailout funds and allowed debt relief after the International Monetary Fund relaxed its tough stance.

Dollar index, which tracks the strength of the greenback against a basket of six currencies, traded down at 95.25 during European trades Thursday compared to 95.59 at close New York time on Wednesday.

Adding to this, the Fed Chair Yellen will appear at a panel at Harvard University on Friday, a day on which investors will also see the second estimate of US first-quarter growth.

Meanwhile, data released Thursday showed Italy's retail sales declined for the first time in three months during March and at the fastest pace in nearly two years.

Retail sales fell 0.6% from February, when they grew 0.3%. Sales were flat in January.


EURINR retraced from the day high 75.41, and settled at 75.15 levels. A breakdown of short term consolidation is indicating for bearishness in EURINR, and any rise towards 75.60-75.70 is expected to attract huge selling activities target 75.20-75.00. Stop loss above 75.80.

On the other hand, a break above 76.00 expect to test 76.25-76.50.

GBP off 3-week high after UK revises downward Q1 GDP data

GBPINR retraced from  3 week high during European trade Thursday after the United Kingdom revised down its first quarter GDP to 2% year-on-year from 2.1% previously, but the quarter-on-quarter growth was unchanged at 0.4%.

UK's gross domestic product rose 0.4% in the first quarter from previous three months, unrevised from the estimate published on April 27. It was slower than the 0.6% expansion posted in the fourth quarter of 2015.

However, this was the 13th consecutive quarter of positive growth since first quarter of 2013.
On a yearly basis, GDP grew by 2% instead of 2.1% estimated previously.

However, construction output dropped by 1%, from the revised estimate of 0.9%. The dominant service industries output grew 0.6% as estimated. Also, UK's production output decreased by unrevised 0.4%.


GBPINR had a volatile trading on Thursday, and after hitting a high of 99.20 settled at 98.70 levels. Near term trend is expect to remain volatile following to snaky headlines from U.K. poll.   

Technically, any correction towards 98.50-98.40 is expected to give buy opportunity with stop loss below 98.15.

Japanese Yen extended its fall as dollar falls post Greece deal

Yen snapped two-day gains Thursday as dollar weakened against majors after Eurozone finance ministers agreed to disburse new bailout loans to Greece

Meanwhile, Bank of Japan said on Thursday that producer prices in Japan were up 0.2% on year in April, in line with expectations and unchanged from the previous month.

The yen turned weaker in Asia on Friday despite consumer prices for April a bit better than expected on the core measure and as investors await remarks by Fed Chair Janet Yellen on rates following a drumbeat of policy makers suggesting a hike as early as the June meeting.

USD/JPY changed hands at 109.91, up 0.13%, while AUD/USD was down 0.01% to 0.7225.
In Japan, national CPI for April fell 0.3%, in line with the 0.3% drop seen year-on-year, while national core CPI also dropped 0.3%, below the expected 0.4% decline year-on-year.

Consumer prices remain under pressure from lower goods prices as food companies and restaurant chains were cautious about raising prices at the start of fiscal 2016 in April.

Service costs, which account for a little over half of the CPI basket showed a slight pickup, with a tighter labor supply supporting prices for housekeeping and medical services.

Overall a slower pace of wage hikes in fiscal 2016 is clouding the prospect for the Bank of Japan guiding inflation to 2% from zero in the medium term. It is still uncertain whether the recent pickup in crude oil prices will continue amid slow global growth.

§  Major Economic Data & Events Schedule today

Economic Indicators
Possible Impact
Tokyo Core CPI y/y

National Core CPI y/y
Day 2
G7 Meetings
BOJ Core CPI y/y
Prelim GDP q/q

Prelim GDP Price Index q/q
Revised UoM Consumer Sentiment

Revised UoM Inflation Expectations
Fed Chair Yellen Speaks

Impact: High Low Medium

More will Update soon..


Thought for the day