Pramit Brahmbhatt is CEO of Alpari Financial Services (India)
The USD/INR pair continued to trade range bound last week also, Indian equities traded strong and closed on a positive note for the second consecutive week as investors gained confidence after the government's budget assured to maintain fiscal deficit. FIIs were also the net buyers this week which helped Rupee to trade strong despite of the sustained dollar demand from oil importers and banks. The tussle between the oil importers and FIIs forced the Rupee to trade in a tight range. Expect Rupee to trade range bound in the absence of any major domestic or global triggers. The trading range for the spot USD/INR pair is expected to be within 61.50 to 62.80.
It is recommended to be cautious and Buy USD/INR (Futures) on dips with the appropriate stop loss as overall Rupee is expected to depreciate. The Pivot Point for the Pair is at 62.27 and below is the Support and Resistance levels.
Japan's monthly data dump provided the market with a glimpse into the world's third largest economy. On the whole it appears the once struggling economy is finding its feet. During January industrial production increased at its fastest pace since 2011, retail trade and housing spending smashed expectations and core inflation matched a five-year high. Industrial production increased 4.0% m/m and 10.6% y/y, smashing the market's expectations of 2.8% y/y and 9.4% y/y respectively. Retail trade rose an impressive 4.4% y/y and 1.4% m/m, also beating the market's expectations. Overall household spending was similarly better than we were expecting; increasing 1.1% y/y.
However, digging into the inflation data it's obvious that the economy still has a long way to go. Real inflation is far less than the headline figure suggests. Japan's need to import significant quantities of food and energy (all of its nuclear power stations remained closed), combined with a lower exchange rate, distort the headline CPI figure. In other words, the rise in import prices can largely be attributed to a weaker yen, as opposed to a stronger economy.
US data was mixed but Wall Street continued to climb higher. Fed Chairman Janet Yellen in the testimony suggested that recent weakness in the economic data flow could be driven by weather impacts, though she stressed the central bank would pay attention to upcoming indicators so as to ensure that there's no fundamental slowing. On the commodity sector, the WTI crude is heading towards its first weekly loss in seven & Gold continued to gain for the fourth consecutive week despite tapering would likely go on.