The Falling Wedge:
USD/INR: Outlook for 6th May – 10thMay:
The prev...: USD/INR: Outlook for 6 th May – 10 th May: The previous post had promised protection for the pair at 54.60 levels, and as expected...
Sunday, May 5, 2013
USD/INR: Outlook for 6th May – 10th
May:
The previous post had
promised protection for the pair at 54.60 levels, and as expected the pair
resisted those levels and rallied up to the 54.03 levels, which was a swift
movement of nearly 1%.
Post a rate cut of 25bps and a promise for further easing on
the back of better CAD and inflation numbers, the RBI governor has managed to
slightly subdue the hawkish tone of its macroeconomic report.
We now have a look at the events for the coming week:
·
S&P rules out an rating upgrade:
o
S&P ruled out a rating upgrade at the ADB
conference, citing slow infra project clearances.
·
Congress morale boost:
o
A likely win in Karnataka will be a morale
booster for the Congress. Also, introduction of Food & Land Acquisition
bill in the parliament through an ordinance would further display Government`s
resolve. However, the latest railway board scam would slightly dampen this
euphoria.
·
New slew of reforms:
o
A new slew of reforms are likely to buoy the
market, with a report ons revision of FDI caps on certain sectors – Defense,
Insurance, etc. would help improve the sentiment. Also, a proposal to fast track
the infrastructure clearances would further boost the investment sentiment.
·
Major flow directions pointing – Inward
o
Inward flows for dominate the market for the
week. Flows from Bharti – Qatar Foundation stake sell and IKEA proposal
clearance and lack of demand from the Oilers may help the USD/INR to stay low.
·
Global Market Events:
o
US Markets are likely to remain bullish based on
positive earnings reports and slight improvements in the Job market
o
Action in the European markets likely to remain
muted, on the grounds of no major data releases this week.
o
BoE policy meet this week would be closely
watched, for further signs of easing.
Overall, the sentiment and the
market seem to be set for a short USD/INR position.
Over the medium term, the pair is likely to stay in the bearish
channel of 53.60 – 54.60 levels. A
likely break outside this channel would warrant a move towards the 53.30 level, with an attempt to fill
the gap. This entire bearish move would be negated by a close above the 54.40
levels.
Technically, the pair faces resistance from a Fibonacci
retracement and Ichimoku Tekan line at 54.03 levels, which should be a good
top. 54.10 / 54.20 also appear to be decent tops to sell on rallies. Also, the
pair displays a spinning top candle-stick pattern which highlights a trend reversal
from the recent rally from the 53.65 to 54.03
The pair is likely to stay within the 53.65 – 54.03 range, with a possible extension to 53.50 or 54.20 levels
on either end.
Option strategy:
A decent option strategy would be to buy a bearish Put
Spread for the 54.50/53.00 level. This would mean buying a 54PUT and selling
53PUT, to play for the 54 – 53 range. A slightly aggressive and cost effective
strategy would be couple this with selling of bullish call spread 54.50/55
levels. This would mean selling the costlier 54.50 Call and buying the low cost
55 Call in the anticipation for the pair to trade outside and below 54.50
levels.
Another low –cost option would be to buy a 53.75/52.75 Put
spread.
Happy Investing!!!
Saturday, May 4, 2013
The Falling Wedge: Konnichiwa, India!
The Falling Wedge: Konnichiwa, India!: S&P Nifty India joins the party…. In the previous post, I had mentioned that how the Superheroes (Heads of various Central Bank...
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