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Sell US $ Futures On A Rise

Monday, August 12, 2013
By Pramit Brahmbhatt

Pramit Brahmbhatt is CEO of Alpari FinancialServices (India)

Last week USD/INR pair traded above the all time high and made a new high of 61.80 mainly taking cues from the weak local equities which closed weak for the third consecutive week. But, this week the rupee is expected to trade strong as the RBI will auction 220 billion rupees of government cash management bills every Monday, to drain out cash from the financial system, the RBI announced last Thursday. Also, investors are expecting government measures to attract foreign inflows in a bid to help narrow a record high current account deficit, which has affected the rupee most. The trading range for the Spot USD/INR pair is expected to be within 60.30 to 61.30.

It is recommended to be cautious and Sell USD/INR Futures on rise with the appropriate stop loss as the rupee is expected to appreciate against the dollar with the help of RBI’s Support. Pivot Point for the Pair is at 61.39.

At present India has been trapped in the vicious circle. The main task for government is to finance the trade deficit; India is one of the largest importers of gold and oil. The RBI has already taken measures to curb the imports of gold and on the oil part the government. should cut down consumption of imported crude oil by steadily lowering the fuel subsidies. So by squeezing the imports of these commodities and by increasing the exports, it will help to lower the current account deficit. But, the costlier fuel will increase the consumer-price inflation somewhere near to the double digit levels thus resulting in cut down of spending on the other things. As a result GDP growth will struggle to exceed last year’s 5%, which is already the lowest in a decade.

The dollar index continued to trade weak for the third consecutive week taking cues from the mixed jobs report released late last week, which increased the uncertainty about when the Federal Reserve will slow the pace of asset purchases, and has been seen as pressuring the dollar’s value. The central bank buys $85 billion a month in U.S. debt and mortgage-backed securities in a bid to hold interest rates. Last week Economic reports from the US showed that the number of US citizens filing new claims for jobless benefits rose slightly for week ended August 3, by 5000 to 333K, compared to an expectation for an increase to 336K.

Last week the European Central Bank trimmed its growth forecast for the Euro region as the bloc struggles to escape a recession. The central bank also reiterated its intention to maintain interest rates at 0.5% for extended period of time. China said its exports rose 5.1% in July, swinging from June’s 3.1% fall.
Analysts expected a 2.8% increase in exports and imports rose by 10.9% last month, after June’s drop of 0.7%. Analysts were looking for a 1.3% rise for imports.

Gold prices also benefited from the U.S. dollar`s drop against major counterparts and recovered from the fall to trade near the previous weekly close. A weaker dollar lifts dollar-denominated gold futures by making them appear cheaper for buyers using other currencies. Gold continued to trade firm after data showed U.S. claims for unemployment benefits rose last week, adding to fears regarding the Federal Reserve tapering monetary stimulus where slower employment growth could force the central bank to keep its gold-supportive policies in place longer.

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