Currency Insight ( May 21, 2105)

Dollar up, bond yields fall as Fed rate hike appears further out

The dollar rose and U.S. Treasury yields fell on Wednesday after minutes from the latest Federal Reserve meeting bolstered expectations that U.S. interest rates will remain near zero until later in 2015.The minutes, released ahead of a much anticipated speech on Friday by Fed Chair Janet Yellen, showed that many officials at the April 28-29 meeting believed it would be premature to raise rates in June. Officials were concerned about soft consumer spending, though most Fed members expect the U.S. economy to pick up pace after a slowdown in the first quarter.

Record fines for currency market fix

Five of the world’s largest banks are to pay fines totalling $5.7bn (£3.6bn) for charges including manipulating the foreign exchange market. Four of the banks – JPMorgan, Barclays, Citigroup and RBS – have agreed to plead guilty to US criminal charges.

The fifth, UBS, will plead guilty to rigging benchmark interest rates. Barclays was fined the most, $2.4bn, as it did not join other banks in November to settle investigations by UK, US and Swiss regulators. Barclays is also sacking eight employees involved in the scheme. US Attorney General Loretta Lynch said that “almost every day” for five years from 2007, currency traders used a private electronic chat room to manipulate exchange rates.

Asia stocks mostly rise as dollar gains after robust US data

Asian stocks were mostly higher Wednesday as a rebound in U.S. home construction and a surprise announcement by the European Central Bank to frontload bond buying sent the greenback higher, giving a boost to Asian exporters.
Equities gain, euro slumps as ECB eyes faster bond buys

U.S. and European equities rose to trade near record highs on Tuesday, and the euro tumbled on signals the European Central Bank may accelerate its 1 trillion euro bond-buying programme over the next two months. The dollar gained 1.5 percent against the euro and was broadly ahead for a second day, while U.S. Treasuries prices fell after data showed that U.S. housing starts in April rose to the highest in nearly 7-1/2 years.

Oil prices slumped more than 3 percent, partly because of the dollar rally. Wall Street’s Dow Industrials index closed at an all-time high, though other major U.S. stock indexes mostly eased in choppy trading, unsettled by disappointing Wal-Mart results and fears the housing data might encourage Federal Reserve policymakers to move sooner on interest-rate hikes.

Important events and their explanation:
Time ( IST) Currency Economic Data Expectation Previous
8:15am CNY HSBC Flash Manufacturing PMI 49.4 48.9
 1:30pm EUR French Flash Manufacturing PMI 48.6 48
2:00pm EUR German Flash Manufacturing PMI 51.9 52.1
3:00pm GBP Retail Sales m/m 0.40% -0.50%
6:00pm EUR ECB Monetary Policy Meeting Accounts
7:00pm USD Unemployment Claims 271K 264K
8:30pm USD Existing Home Sales 5.23M 5.19M
USD Philly Fed Manufacturing Index 8.1 7.5


USD –  If Unemployment claim comes with a higher number, positive for bullions and for INR.

USD –  Home sales again a very important event, we assume actual might come less than the expected, hence again a negative for dollar

EUR-  ECB Monetary meeting might remain status quo, means rates might remain unchanged. Negative for Euro.

Technical touch :

NSE-CUR USDINR 27MAY2015_2Hour_6Month

As seen pair is trading near its crucial support of rising trend line in a 120 mins chart. Intrestingly its also forming a bearish flag pattern but tredline not yet pierced.

For the next few sessions we assume if pair pierced its 63.68/64 levels the next downside target would be 63.38 levels.

Support is expected to be around 63.40/50 levels and resistance 64.00/30 levels.




After a prolonged downtrend pair tried to form its base and RSI moved into bullish territory.

As seen RSI is trading near its rising trend line. Hence we assume INR might appreciate till 70.55/40 levels

Support is expected to be around 70.38/69.90  levels and resistance 71.63/78  levels.