Dollar Strenghthens Ahead Of Elections

USD/INR ended snapped a three-day losing streak after hitting a one-week low of 53.60 early in the session on Friday as sharp losses in the euro prompted banks to cover their short dollar positions heading into the weekend. The rupee lost 0.2 per cent on the day, taking its fall to 0.5 per cent on the week. Further fall in the rupee was averted due to gains in Indian equities. However, the dollar has jumped as traders pared positions in risk markets ahead of US Election. A strong US nonfarm payrolls report with an upward revision of the previous month’s readings will strengthen USD/INR pair today.

The nonfarm payroll report showed 171k growth in the US job market in October, much better than consensus of 120k. September's figure was also revised up from 114k to 148k. Unemployment rate edged higher from 7.8% to 7.9% as expected. ISM manufacturing index unexpectedly rose to 51.7 in October. Consumer confidence rose to 7.2.2 in October. USDINR pair is likely to open up around 54.10 tracking losses in EUR/USD pair on Friday post Indian market closing. Pair will most likely trade in range of 53.90 to 54.40 today.

EUR/USD: EUR/USD pair lacked tumbled to trade at 1.2834. The euro area bank lending survey showed that credit tightening continues at a slightly increased pace. CB consumer confidence release, left the dollar meandering. The NFP was released showing the US had created more jobs than expected and also revisions upwards of prior months. The euro collapsed post NFP data.

The euro extended it's corrective fall against dollar last week on stalemate in Greece and Spain. German finance minister Schaeuble said that "there are a lot of difficult issues that still need to be resolved: and the next report by troika wouldn't be ready before November 11. There is still no news about Spain's bailout even though the coming ECB meeting this week will be the second one after OMT announcement.

With pending issues, upcoming ECB meet and US elections, EUR/USD pair will be under pressure. Moreover markets will react negatively, if ECB fails to elaborate on OMT and Spanish bailout situation in this week’s meet. EUR/USD pair is trading below its 200 SMA for the first time after 11th September 2012. Immediate support for the pair is 1.2754 while resistance is 1.2830. We expect the pair to fall up to 1.2754 levels.

GBP/USD: There was little the pound could do with no news flow and no eco data, the GBP just moved with the flow, which saw the US dollar climb ahead of the NFP report and then jump after the positive data was release. The US economy cranked out 170,000 jobs during October, higher than the approximately 125,000 that were expected.

The U.S. Labor Department also said numbers for August and September were revised upward to show an additional 84,000 jobs were created. The U.S. unemployment rate was 7.9 per cent last month, up 0.1 of a point in September. GBP/USD pair will trade range bound till the outcome of BOE meet this week. We look for range of 1.5950-1.6070.

USD/JPY: The dollar extended its recent gains to score a six-month high against the yen. At JPY80.65 retraced half of the decline seen from March’s JPY84.20 high. The next key retracement objective is found near JPY81.50. The yen’s weakness is puzzling, not because it is backed by strong fundamentals, but rather that the typical drivers, such as change in interest rate differentials and the performance of equity markets (risk-on/risk-off), do not appear to be operative. Initial dollar support is seen near JPY80.00-15.