From Friday’s 73.05 close and 15 pips above a vital break point at 72.90, EUR/INR’s crucial position resolves Tuesday upon release of Industrial Production and CPI. Q4 2015 saw Inflation at 5.41 and 5.20 expected year over year. Monthly, July and August lows at 4.36 and 4.34 were exceeded by November’s 6.71 highs and far above RBI’s immediate 6% target. Retail sales, Food, education and healthcare contributed to recent highs. Minus Food and energy, CPI still rose from 5.31 September to 6.71 November highs. The 5% RBI Inflation target to deflate is expected by March 2017 while 4% is expected in 2018.
Industrial Production 3.0 is forecast from 9.8 last and increased due to the 16% rise in Heavy commercial vehicle sales. Despite growth in capital goods and passenger cars, overall IP is expected to slow due from weak demand. December’s RBI Statement reports Exports continued its 11 month in a row decline due again to weak global demand. Passenger cars at 6,000 cars and 85,000 Commercial vehicles contributed to India’s Exports as both are consequently at 5 year export highs. The March – April quarter’s 14% increase in passenger vehicles year over year assisted to offer quarter to quarter context. Gems and Jewelry constitute 16% of Exports and account for 22% of India’s GDP. GDP last at 7.4 and 7.49 expected in February may be revised downward upon IP’s release Tuesday.
India’s 6.90 overnight Repo rate and Call Money rate at Friday’s 6.76 close are both in line with the RBI’s tightening cycle since January 2015 as Repo rates were cut from 8% to current 6.75%. The current Repo Rate range is 5.70 – 7.60 and Call Money from 5.70 – 7.35. Call Money rates trade above the 32 day average at 6.65 but below the 54 and 78 day averages at 6.83 and 6.85. The big point line break is found at 6.97 and below at 6.68 then 6.65. Short term Call Money targets are found at 6.43, 6.44 and 6.95.
EUR/INR prices from monthly averages are driven by the 2 and 3 year intervals as both correlate to EUR/USD at 0.96 and 0.81. The larger EUR/INR range is found between 70.30 and 71.17 below vs 75.60 and 76.70 above. To head lower, EUR/INR must break 72.90 to trade inside 72.90 – 71.17. Above 72.90, range becomes 72.90 – 75.60. EUR/INR 72.90 coincides with EUR/USD at vital point 1.0921. Both breaks determine direction for both pairs this week. Against India’s deflation, weak IP, Exports and a cut in Iron Ore Exports to China, EUR/INR will remain on a steady path downward.