Crude and currency monitor July 24, 2005
|
|||
|
July 24, 2005 |
|||
The markets saw a volatile week as the major triggers were the Chinese revaluation of the yuan ( renminbi ) and the terror attacks in London, exactly a fortnight after the 7/7 attacks. Both the commodities in question will gyrate on these dual triggers as terror premium, import prices of crude and export potential, FDI / FII inflows will determine the INR support. There is no doubt that India stands to gain from the Chinese revaluation. Further adjustments are not ruled out, implying more good news. The INR will gain strength as the FII's / FDI inflows will accelerate while the Rupee is climbing vis-a-vis the US $. Traders will recollect the rush of dollars 2 - 3 years ago into the country as FII's got a bigger bang for the buck for the same amount of dollars invested. The Rupee / Dollar parity will also hinge on the Aug 03, 2005 meet of the US treasury which will determine the fate of the proposal to float 30 year long term US treasury bonds. Oil on the other hand seems undecided. There exists a school of thought that is of the opinion that terror attacks will curtail air travel, cause recession and curb petroleum consumption. That is likely to cool oil prices. An opposite view is that there will be a terror premium of crude prices as supplies could be disrupted to western nations ahead of stock piling ahead of the winter season. The reports of possible higher Chinese offtake from the global markets is likely to be a key factor for now.
As projected by us earlier, the crude prices have indeed cooled off. There is a lower tops and bottoms formation as the 56 $ levels were tested. While the oscillators are pointing towards a bullish outlook, a minor fall cannot be ruled out. Any break below the 56.10 levels will see the slide accelerating till the 54 $ mark where fresh buying and short covering maybe seen. On the other hand, a rally to the 58.50 - 59.50 will see fresh upmoves to 60.50 - 61 in the coming week.
The coming fortnight is likely to remain volatile for crude prices and we advocate taking a clear view only after a breakout / breakdown. Traders may play the MCX crude as well as take positions in contrary directions on HPCL, BPCL & IOC as these scrips will move in diametrically opposite direction as compared to crude. ONGC on the other hand will gain from higher crude prices.
The US $ has finally moved in the direction projected by us - down ! The 43.10 levels were tested and we feel this level is likely to be a maginot line of sorts, below which the US $ can slide to the 41.50 - 41.00 levels in a 6 month period. Long positions on the US maybe cut and higher levels may attract short selling. We feel technology scrips are likely to remain under pressure in the absolute short term due to the weak US $.
Take a medium term bearish view on the US Dollar.
Standby for fresh recommendations via SMS / yahoo messenger on a real - time basis. Your feedback is important ! Please click here to let us know your views. Click here to inform a friend about our website.
The author is a Mumbai based investment consultant and invites feedback at Vijay@BSPLindia.com and ( 022 ) 23438482 / 23400345. SEBI disclosure - The author has no positions in the commodities / currencies mentioned above.
Legal notice :- The Professional Ticker Reader is a trademark of Bhambwani Securities (P) Ltd. and any un-authorised replication / duplication in part or full will be infringing our trademark and will result in legal action being enforced on the infringing persons / parties. |
Your feedback is important ! Please click here to let us know your views. Click here to inform a friend about this page on our website.