INDIA: India Country Wrap: RBI Expected to Up Purchases of Bonds.
- A BBG survey of market participants shows that investors expect the RBI to ramp up their purchases of bonds in a bid to increase liquidity. (source: BBG).
- On the back of October’s significant inflation spike due to vegetable prices, unseasonably warm weather and limited rain sees the possibility of a material impact on the nation’s wheat harvest at a time when the RBI suggests that inflation is moderating. (source: BBG).
- In its monthly bulletin released yesterday the Reserve Bank of India (“RBI”) described global growth as ‘steady’ highlighting concerns as to the pace of moderation of inflation and the looming threat of tariffs. The RBI gave a nod to the pressures felt in Emerging Markets for investment outflows and the impact the dollar is having on their currency. The RBI indicated that their ‘high frequency indicators’ are pointing to ‘a sequential pick up in momentum of economic activity during the first half’ and is in their belief likely to be sustained going forward (source: MNI – Market News)
- As regional markets tumble today, India’s NIFTY 50 is opening weak down by -0.15%.
- INR: regional markets had a better day today and the rupee is opening stronger at 86.79, a gain of +.18%, tipping the 5-day into positive.
- Bonds: despite the headline about the potential for the RBI to be buying bonds, the market still remains quiet with the 10YR at 6.685% unchanged in recent days.
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Historical bullets
BOBL TECHS: (H5) Corrective Cycle Remains In Play
- RES 4: 117.792 50-day EMA
- RES 3: 117.490 Low Dec 30
- RES 2: 117.300 20-day EMA
- RES 1: 117.170 Intraday high
- PRICE: 117.110 @ 05:43 GMT Jan 21
- SUP 1: 116.650/280 Low Jan 16 / Low Jan 14 / 15 and bear trigger
- SUP 2: 116.210 Low Jul 12 2024 (cont)
- SUP 3: 115.980 Low Jul 11 ‘24 (cont)
- SUP 4: 115.745 1.50 proj of the Oct 1 - 31 - Dec 2 ‘24 price swing
A bear cycle in Bobl futures remains intact, however, a corrective phase is in play and the contract maintains a firmer short-term tone. The Jan 15 rally highlighted a short-term reversal and the start of a corrective cycle. An extension higher is allowing an oversold trend condition to unwind. Key short-term resistance is seen at 117.300, the 20-day EMA. On the downside, a break of 116.280, the Jan 14 / 15 low, would resume the downtrend.
EURUSD TECHS: Pierces Trendline Resistance
- RES 4: 1.0630 High Dec 06
- RES 3: 1.0568 High Dec 10
- RES 2: 1.0461 50-day EMA
- RES 1: 1.0437 High Jan 6
- PRICE: 1.0379 @ 05:59 GMT Jan 21
- SUP 1: 1.0260/0178 Low Jan 15 / 13 and the bear trigger
- SUP 2: 1.0138 1.764 proj of the Sep 25 - Oct 23 - Nov 5 price swing
- SUP 3: 1.0097 2.0% 10-dma envelope
- SUP 4: 1.0031 2.000 proj of the Sep 25 - Oct 23 - Nov 5 price swing
The latest recovery in EURUSD appears corrective, however, the pair has breached the 20-day EMA, at 1.0346, and pierced trendline resistance at 1.0393, drawn from the Sep 30 ‘24 high. A clear breach of the line would expose the 50-day EMA at 1.0461. Clearance of this average would strengthen a bullish condition. Key support and the bear trigger is at 1.0178, the Jan 13 low. The medium-term trend condition remains bearish.
BUND TECHS: (H5) Corrective Cycle
- RES 4: 137.75 Low Dec 10
- RES 3: 135.15 High Dec 13
- RES 2: 132.41 20-day EMA
- RES 1: 132.15 Intraday high
- PRICE: 132.03 @ 05:37 GMT Jan 21
- SUP 1: 131.00 Low Jan 16
- SUP 2 131.00/130.28 Low Jan 16 / Low Jan 15 and the bear trigger
- SUP 3: 130.44 Low Jul 5 ‘24 (cont)
- SUP 4: 130.23 Low Jul 3 ‘24 (cont)
The Jan 15 rally in Bund futures highlighted a short-term reversal signal - a bullish engulfing candle. It suggests scope for a continued corrective phase that is also allowing an oversold trend condition to unwind. A continuation higher would open 132.41, the 20-day EMA. The medium-term trend is unchanged, it remains bearish. The bear trigger has been defined at 130.28, the Jan 15 low, a break would resume the downtrend.
