11th October 2019

12th November 2019

Fundamental Outlook

Indian Rupee: For the coming month, we are expecting rupee to trade mixed to bullish amid strengthening of US dollar with positive cues between US and China trade talks. In addition, rupee could also find weakness as hopes of deep supply cuts by the OPEC member countries during the upcoming OPEC meeting on 6th December could lift up crude prices, eventually putting pressure on the rupee. Though the Indian equity markets have showcased revival in the past few weeks, however, global factors hold dominance on the rupee movement in the international level. Gold prices remain to be steady which has also affected the rupee though the festive season of Diwali has ended. However, major upside could also be capped as domestic markets hope for revival of the Indian economy in various sectors after slowdown witnessed since the start of the year 2019. In conclusion, the above factors are more likely to bring sideways to bullish trend in the Indian Rupee with respect to dollar. We expect Indian currency to trade in the range of 70.56-72.62.

Dollar Index: Looking forward for the coming month, we are expecting US Dollar Index to trade mixed with the fall in non farm employment rate, retail and core retail sales and the Average Hourly Earnings on a monthly basis. Other economic indicators such as ADP Non Farm employment change has shown a rise over the months which could cap upside movement. Moreover, fall on jobless claims, higher durable goods could also support the dollar index from major downtrend. Elsewhere, further positive hopes about US China trade news is forecasted to keep the Dollar index steady in the coming month. But then, the location for the next trade meeting and signing of the deal is still pending which is the reason for the mixed trend to prevail in the dollar index. In conclusion with the above factors we are expecting sideways trend in US Dollar Index. We expect Dollar Index to trade in the range of 97.11-99.67.

Euro: Looking forward for the coming month, we expect Euro to witness bearish trend as Europe has still not shown any major recoveries in the past few months. The dominance of the dollar has been highlighted by the policies of President Donald Trump, even though there is positive cues about US China trade talks which can ease the pain in the European Union. As UK is moving towards elections after the failed attempt by Borris Johnson in UK parliament has also pressurized Euro for delay of Brexit till Jan 2020. Moreover, the economic indicators in the major economies of Germany, France and Spain has been reported lower on a monthly basis which is forecasted to further weaken the Euro with respect to dollar. For the month ahead, Euro is expected trade in the range of 1.0879-1.1226.

Sterling Pound: Looking forward for the coming month, we expect sterling pound to trade bullish as United Kingdom is moving ahead with general elections which UK PM Borris Johnson wanted to push for proper Brexit by January 2020. However, Bank of England has kept monetary policy and key interest rates unchanged amid general elections which could cap major upside. Among the major fundamentals, the retail sales and Services PMI has inclined on a monthly basis, while the Average Earnings Index 3m/y and PPI Input m/m has slumped during the last month. But, the Manufacturing PMI has increased which could support uptrend in the Sterling Pound. In the coming month, the sterling pound is estimated to trade in the range of 1.25-1.32.

Japanese Yen: For the month ahead, we are expecting Yen to trade mixed to bullish as Bank of Japan Gov. Haruhiko Kuroda said 5th November that additional monetary easing by the central bank will not be limited to cutting interest rates, while adding that the economy is likely to stay firm despite the recent consumption tax hike. He further added that the central bank could lower the borrowing costs if necessary adding concerns that the global recession could soon hit the Japanese economy drastically. Under the new guidance, the BOJ is expecting short- and long-term interest rates to remain at their present or lower levels as long as there is a possibility of losing momentum toward its 2 percent inflation goal. Market participants have increasingly expected the BOJ to reduce short-term rates from the current minus 0.1 percent in any additional easing. In conclusion, all the above factors indicate mixed to bullish trend in the USD/JPY Futures during the coming month. For the month ahead, Japanese Yen is expected to trade in the range of 104.45 to 112.41.

News & Development

U.S.-China trade deal signing could be delayed to December; London a possible venue Officials have confirmed that it was still possible the “phase one” agreement aimed at ending a damaging trade war would not be reached, but a deal was more likely than not. Dozens of venues have been suggested for the meeting, which had originally been scheduled to take place on the sidelines of a now-canceled mid-November summit of Asia-Pacific leaders in Chile. One possible location is London, where the two leaders could meet after a NATO summit that Trump is due to attend from December. 3rd -4th, the official added. “It’s under consideration but nothing decided,” the official said. Other sites are possible in Europe and Asia, but the former is more likely, with Sweden and Switzerland among the possibilities. China’s latest push for more tariff rollbacks would be discussed, but was not expected to derail progress toward an interim deal. Officials expects that China was believed to see a quick deal as its best chance for favorable terms, given pressure Trump is facing from a congressional impeachment inquiry as he seeks re-election in 2020. “Negotiations are continuing and progress is being made on the text of the phase one agreement,” White House spokesman Judd Deere said. “We will let you know when we have an announcement on a signing location.” The above news are more likely to bring a mix trend in Dollar index eventually keeping the Indian rupee range bound for the month ahead.

As showcased in the above chart, Indian rupee had traded mixed during the month of October, depreciated during the first week of September after easing tensions in UK Brexit, trade tensions between US and China, however, rising middle east issues with possibility of further supply cuts and the impact of the slowing Indian economy witnessed on the ground level though the retail inflation reported lower is somewhere bringing weakness in the rupee.

For the coming month, we are expecting rupee to trade mixed to bullish amid strengthening of US dollar with positive cues between US and China trade talks. In addition, rupee could also find weakness as hopes of deep supply cuts by the OPEC member countries during the upcoming OPEC meeting on 6th December could lift up crude prices, eventually putting pressure on the rupee. Though the Indian equity markets have showcased revival in the past few weeks, however, global factors hold dominance on the rupee movement in the international level. Gold prices remain to be steady which has also affected the rupee though the festive season of Diwali has ended. However, major upside could also be capped as domestic markets hope for revival of the Indian economy in various sectors after slowdown witnessed since the start of the year 2019. In conclusion, the above factors are more likely to bring sideways to bullish trend in the Indian Rupee with respect to dollar.

71.24 69.67

69.37

69.34 70.53

69.80

71.39

68.53

68.81

72.39

71.54 70.80

67

68

69

70

71

72

73

Indian Rupee (USD/INR)

Source : Bloomberg & Choice Research

US Dollar Index has sustained in higher levels during the last month and first week of November owing to hopes of revival of the US economy and FED rate cuts of 25 basis points which had increased the liquidity in the global markets; in attempts to revive the slowing of the international economies. Moreover, dollar index has sustained on the higher levels with postive cues about US China trade talks and hopes of further trade talks to finish with a deal.

Looking forward for the coming month, we are expecting US Dollar Index to trade mixed with the fall in non farm employment rate, retail and core retail sales and the Average Hourly Earnings on a monthly basis. Other economic indicators such as ADP Non Farm employment change has shown a rise over the months which could cap upside movement. Moreover, fall on jobless claims, higher durable goods could also support the dollar index from major downtrend. The initial jobless claims has fallen down to 218K by 25th October as compared to 220K reported a month ago. The unemployment rate has risen to 3.6% in Oct’19 as reported by U.S. Bureau of Labor Statistics, compared to 3.5% of the previous month. The non farm employment rate fell to 128K reported on Oct’19, compared to 180K of the previous month. But, Notable job gains occurred in food services and drinking places, social assistance, and financial activities.

Average Hourly Earnings m/m has been reported at 0.2%, higher compared with previous actuals of 0.0%. In the same way, the ISM Manufacturing PMI has been reported to be lower at 48.3 compared to the forecasts of 49.0. Likewise, Personal Spending m/m has reported to be flat at 0.2% compared to the previous actuals of 0.2%. Furthermore, CB Consumer Confidence which is the leading indicator of consumer spending and accounts for a majority of overall economic activity; has been reported to be higher at 125.9 compared to the forecasted 128.0, and lower compared to 126.3 of Oct’19. Retail Sales m/m has been reported at -0.3%, lower compared to previous actuals of 0.6%, while Core Retail Sales has been reported at -0.1% compared to 0.2% compared to previous actuals. Elsewhere, further positive hopes about US China trade news is forecasted to keep the Dollar index steady in the coming month. But then, the location for the next trade meeting and signing of the deal is still pending which is the reason for the mixed trend to prevail in the dollar index. Moreover, Phase one trade deal and roll over of all the tariffs of China are facing internal opposition in the White house and from the outside advisors. This could bring some tensions in the near term and cap upside in the dollar index. In conclusion with the above factors we are expecting sideways trend in US Dollar Index.

98.14

96.51

97.23

97.02 97.66 97.56

98.52

99.37

97.98

98.92

94.5

95.5

96.5

97.5

98.5

99.5

US Dollar Index (DX)

Source : Bloomberg & Choice Research

The Euro has traded higher during the last month with positive cues about US and China and progress witnessed in the European Union regarding UK Brexit. Moreover, recoveries were also witnessed in the economic data of major economies of European Union such as Germany, France and Spain which has strengthened Euro.

Looking forward for the coming month, we expect Euro to witness bearish trend as hopes of further positive trade talks between US and China could ease the European equity markets and further revive trade activates between the countries. German Flash Manufacturing PMI has reported at 41.9 similar compared to the forecasts of 42.0 and higher compared to previous reports of 41.7. Moreover, French Flash Manufacturing PMI has been reported to be higher at 50.5 compared to forecasts of 50.0. In addition, French Flash Services PMI for the month of Oct’19 has been lower at 52.9 compared to forecasts of 51.6, and the German Flash Service PMI is also lower at 51.2 compared to 52.0 of the previous month. Furthermore, Flash Manufacturing PMI has been at 45.7 in Oct’19 compared to 46.1 of the forecasts. Correspondingly, Flash Services PMI has been higher at 51.8 compared to 51.6 of the previous reports and forecasts. But then, Spanish Unemployment Rate has remained on the higher zone of 13.9% compared to forecasts of 13.8% which can limit major downtrend in the Euro.

The Sterling pound appreciated by 0.811% during the last couple of weeks with approval of Brexit deal by the European Union, however, rejection by the House of Commons in the UK Parliament led cap in Sterling Pound by the end of the October month. But then, Pound currency is still witnessing support with approval of new general elections in the United Kingdom by the Parliament.

Looking forward for the coming month, we expect sterling pound to trade bullish as United Kingdom is moving ahead with general elections which UK PM Borris Johnson wanted to push for proper Brexit by January 2020. However, Bank of England has kept monetary policy and key interest rates unchanged amid general elections which could cap major upside. Likewise, Retail Sales m/m from UK came in at 0.0% for Oct’19, lower compared to market expectations of -0.1%. Services PMI has increased to 50.0 compared to 49.6 of the market expectations. However, Average Earnings Index 3m/y has decreased to 3.8% from 4.0% of the forecasts. Consistently, CPI y/y has been reported at 1.7% compared to 1.8% of the forecasts. PPI Input m/m has been reported at -0.8% compared to 0.2% of the forecasts. But then, Manufacturing PMI has also been reported at 49.6 compared to the forecasts 48.2 of the forecasts. Overall, the above factors indicates bullish trend in the Sterling pound for the coming month.

1.136 1.122

1.105

1.129 1.127 1.133

1.120

1.139 1.136

1.113

1.108

1.08

1.10

1.12

1.14

1.16

1.18 Euro (EUR/USD)

Source : Bloomberg & Choice Research

1.294 1.273

1.325

1.252

1.310 1.317

1.288

1.227

1.229

1.298

1.272

1.15

1.20

1.25

1.30

1.35

Sterling Pound (GBP/USD)

Source : Bloomberg & Choice Research

Based on the above chart the Japanese Yen had majorly depreciated during the month October and during first week of November month owing to easing trade tensions between US and China which has led to shift in investments from the Save Haven Japanese Yen back to the US dollar. In addition, revival of global markets has also led to strengthening of dollar eventually putting pressure on the Yen. Moreover, Bank of Japan continues with ultra loose monetary policy which has also reduced buying of the Japanese currency.

For the month ahead, we are expecting Yen to trade mixed to bullish as Bank of Japan Gov. Haruhiko Kuroda said 5th November that additional monetary easing by the central bank will not be limited to cutting interest rates, while adding that the economy is likely to stay firm despite the recent consumption tax hike. He further added that the central bank could lower the borrowing costs if necessary adding concerns that the global recession could soon hit the Japanese economy drastically. Under the new guidance, the BOJ is expecting short- and long-term interest rates to remain at their present or lower levels as long as there is a possibility of losing momentum toward its 2 percent inflation goal. Market participants have increasingly expected the BOJ to reduce short-term rates from the current minus 0.1 percent in any additional easing.

But many banks have grown concerned that deeper negative rates could eat into their profit margins. The BOJ is in a bind. Years of heavy money printing has failed to fire up inflation, forcing the central bank to maintain a massive stimulus despite rising costs, such as the hit of near-zero rates on financial institutions. Monetary easing could also lead to further stress on the economy as Japan has so far been unable to come out of the deflation scenario. Trade optimism between US and China could further revive the global markets. Markets players await for further trade confirmation between US and China as the location for the next trade talks meeting is still not confirmed. US President Donald Trump earlier said that he wanted to sign a deal by mid-November. But then, China fears that the trade deal may not have a long term impact even though US has cancelled import tariffs on some of the Chinese goods. Brexit extension till January 2020 and general elections in UK to push for deal/no deal Brexit is estimated to drop demand for Yen in the weeks to come. Overall, we expect sideways to bullish trend in Japanese Yen for the month ahead.

108.45

109.96

111.35 110.08

111.89

106.74

109.16 108.68

112.16

109.92 108.12

103

105

107

109

111

113

115

Japanese Yen (USD/JPY)

Source : Bloomberg & Choice Research

Technical Outlook USDINR

On a weekly timeframe, USDINR (Nov) pair has tested the lower “Ichimoku Cloud” on multiple occasions and witnessed pullback from those levels. Currently the pair has edged higher after taking support of the Ichimoku Cloud which is in confluence with the 38.20% Retracement of the prior fall which has acted as a strong support. Moreover, the pair is trading above it’s weekly 50*200 Exponential Moving Averages, which confirm the pair’s bullish strength. Furthermore, on a weekly timeframe after forming a “Doji” Heikin Ashi candle pair has formed a strong bullish green candle, which indicates positive move in the near term for the prices. Additionally, a momentum indicator RSI(14) has sustained above it’s 50 level, which confirms bullish strength in the pair. Based on the above technical parameters, we can expect bullish movement in the USDINR (Nov) futures for the month ahead. On the higher end, the price may find the resistance around 72.62 levels, while on the lower end, it may test the support at 70.56 levels.

On a weekly timeframe, GBPUSD (Nov) pair has pulled back from it’s previous swing low and is taking resistance near the lower “Ichimoku Cloud”, also this level is in conjunction with the 38.2% Retracement level of the prior fall which is acting as a strong resistance. Moreover, on the weekly chart the pair has formed a series of Lower Highs and Lower Lows, which confirms that the pair is in a downtrend. Furthermore, the pair is trading below it’s weekly 200 Exponential Moving Average, which indicates weakness in the pair. In addition, the weekly Heikin Ashi candle has formed a bearish “Doji”, which indicates that the bears have taken control. Based on the above technical structure, we can expect bearish movement in GBPUSD (Nov) futures for the month ahead. On the higher end the price may find resistance around 1.32 levels, while on the lower end it may test the support at 1.25 levels, which are the levels of 50% and 23.6% Retracement of it’s prior downtrend respectively.

Technical Outlook GBPUSD