Commodity Report 9th March 2020

Important highlights The Federal Reserve slashed interest rates by half a percentage point on Tuesday, an emergency rate cut to give the US economy a jolt in the face of concerns about the coronavirus outbreak. The new benchmark interest rate is a range of between 1% and 1.25%. UK Markit services PMI rose to 53.2 in February from 53.3 January, missing market expectation of 53.3. UK Markit construction PMI rose to 52.6 in February from 48.4 January, beating market expectation of a slight rise to 48.8. China’s foreign exchange reserves—the world's largest—fell by $8.779 billion in February to $3.107 trillion, central bank data showed on Saturday. US trade deficit dropped 6.7% to $45.3 billion also as exports fell. US February non-farm payroll stood at 273K as compared to the previous report of +225K (revised to 273K). US unemployment rate was at 3.5% as compared to 3.6% last month 3.6%. Avg hourly earnings rose 0.3% MoM versus, a 0.3% rise in previous month. Canada February employment data was at +30.3K as compared to 11.0K expected. US January consumer credit stood at +$12.0B as compared to the previous figure of $22.055B. US jobless claims fell by 3,000 to 216,000 in the week ended February 29. German February construction PMI stood at 55.8 as compared to the previous reading of 54.9. Concerns over the coronavirus epidemic continued to trigger a speculative upward move in the USDINR pair for the second consecutive week. The USDINR pair jumped more than 2%, which is the highest weekly gain since 26 August 2018 and crossed its 16th month high, as importers hedged their future payables on fears of a further rise in the spot pair, following fears over the coronavirus outbreak amid outflow from the local share market, offsetting the impact of the weak US dollar, which plunged more than 2%, and the Chinese yuan gained 0.79% against the dollar. Technically, as per last week’s outlook, the USDINR pair broke its massive resistance of 72.55 and jumped towards 74.2850 levels. A strong breakout of the symmetrical triangle resistance at 72.55 and the formation of a long bullish candlestick on the weekly chart is still indicating a bullish momentum in the near future and the next upside target expected at 74.80–75.20. However, the US dollar continued to plunge following the recent speculation of a Fed rate cut next month, which capped upside momentum in USDINR pair too. On the downside, 72.80 will act as a crucial support and a break below it will cause selling pressure, and the pair may retreat towards immediate support of 72.40–71.80 levels. The drastic fall in the US dollar supported the EUR for the second consecutive week. The currency gained more than 2% against the dollar and jumped 5% against the rupee, which was the highest gain ever. The EURINR pair jumped to the highest level since 11 April 2018 on Friday, tracking a weakening greenback amid expectations of a Federal Reserve rate cut in its upcoming monetary policy. In beginning of the week, the Federal Reserve slashed interest rates by half a percentage point, as an emergency rate cut to give the US economy a jolt in the face of concerns about the coronavirus outbreak. This was the first unscheduled, emergency rate cut since 2008, and it also marks the biggest one-time cut since then. The buy strategy given above 80.15 was proven to be accurate and the EURINR pair jumped towards 83.72, hitting both predicted levels of 80.55–80.85. The EURINR pair bottomed out on 20 February and has since gained more than 8%. On the weekly chart, the pair has broken the one-year consolidation resistance at 83.20, which still indicating for bullish momentum in the near future. However, after a sharp gain in the recent trading session, some profit booking may be seen around 83.80–84.00. Hence, buy on dip is recommended for the week with stop loss below 81.30. The pound was able to gain 2.93% against the rupee last week, and settled at 96.10 as compared to the previous week’s close of 93.35. The pound traded higher against the US dollar on Friday after recent comments from the Bank of England Chief hinted that the central bank would not rush into an interest rate cut amid positive comments from the European Union (EU) after the first round of EU-UK trade negotiations. The incoming BoE Governor Andrew Bailey would not rush into an interest rate cut and continued with his calm approach towards dealing with the coronavirus' impact on the economy, which calmed bets of an emergency rate cut. Technically, on the weekly chart, the GBPINR pair broke its massive resistance of 95.50, which has been held since 22 December 2019. A bullish pennant breakout was noted on the chart, which is indicating a bullish momentum in the near future and any temporary correction towards 95.30–95.00 could attract near-term buying activities. On the downside, crucial support is seen at 94.40 and a break below will cause selling pressure towards the immediate support of 93.80­–93.00 again.  The Japanese yen surged to six-month high against the US dollar Friday as dented market sentiments following rising cases of coronavirus in US and Europe led to investors rushing under the safe-haven shelter of the Japanese yen. Investors now bet that the Bank of Japan may ease monetary policy as the coronavirus jolts markets and stokes fears of a recession. The Bank of Japan is due to conduct its next policy review on March 18-19. Technically, a descending broadening wedge breakout was noted on the weekly chart, which is still indicating a bullish momentum in the near future and any temporary correction towards 69.00–69.20 is expected to attract buying activities for the upside target 70.50­–71.50.On the downside, crucial support is seen at 68.50, and a break below could lead to selling pressure and it may test next support of 65.80–65.00. Date Time Currency Economic Indicators Forecast Previous Impact 09.03.20  Tentative CNY Trade Balance - - -   Tentative CNY Trade Balance 306B 329B Negative   Tentative CNY USD-Denominated Trade Balance 36.8B 46.8B Negative   Tentative CNY USD-Denominated Trade Balance - -   10.03.20 7:00am CNY CPI y/y 5.20% 5.40% Negative   10th-15th CNY New Loans 1100B 3340B Negative 11.03.20 3:30am AUD RBA Deputy Gov Debelle Speaks - - -   3:00pm GBP GDP m/m 0.20% 0.30% Negative     GBP Manufacturing Production m/m 0.20% 0.30% Negative   5:00pm GBP Annual Budget Release - - -   6:00pm USD CPI m/m 0.00% 0.10% Negative     USD Core CPI m/m 0.20% 0.20% Neutral   8:00pm USD Crude Oil Inventories - 0.8M - 12.03.20 6:00pm USD Core PPI m/m 0.20% 0.50% Negative     USD PPI m/m -0.10% 0.50% Negative   6:15pm EUR Main Refinancing Rate 0.00% 0.00% Neutral     EUR Monetary Policy Statement - - -   7:00pm EUR ECB Press Conference - - - 13.03.20 7:30pm USD Prelim UoM Consumer Sentiment 95 10 Positive Note: Economic data expectations are based on median forecast by economists or Reuters and Bloomberg survey. Here, a positive impact indicates currency could appreciate and negative indicates currency could depreciate against the US Dollar. Technical Chart Source: Tickerplant *DOS- Depends on statement. DOV- Depends on Votes. DOR- Depends on Report.   Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (IndiaNivesh), for use by the recipient as information only and is not for circulation or public distribution. This document is not to be reproduced, copied, redistributed or published or made available to others, in whole or in part without prior permission from us. This document is not to be construed as an offer to sell or the solicitation of an offer to buy any currency pair. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. 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