Euro To Fall To 1.2840

Rupee fell to 53.73 on Tuesday due to dollar demand from oil companies as Brent Crude fell down. Weakness in the euro-dollar pair during European session on Tuesday further weakened the rupee. Due to holiday truncated week, month end dollar demand will be seen today as well. Euro continued to weaken throughout on Wednesday and currently trades below 1.3 levels.

Dollar strength is expected as US Home sales rose to two year high. On the other hand, some amount of risk buying may be witnessed Greek finance minister Yannis Stournaras said the debt struck nation has been given more time by its lenders to implement austerity measures. USD/INR is expected to open around 53.85-53.90 levels. We expect the pair to trade in a range of 53.60-54.20

EUR/USD: EUR/USD broad based decline extended further on Wednesday after release of a string of weak economic data. The pair made a low of 1.2922 during European session. The composite PMI index fell to 45.8 from 46.1, compared with expectations of a small increase. The danger signs remain with the headline print dropping further below the 50 watermark, indicating a steeper pace of decline in activity amongst the euro members from month-to-month. Of note is that that activity fell faster in manufacturing and contracted close to an unchanged rate in services.

The euro's largest economy, Germany, has not been able to escape economic scrutiny. It's very own preliminary composite PMI headline fell to 48.1 this month from 49.2 in September. The bad news did not stop there. German business confidence fell for a sixth consecutive month to its lowest level in three years-according to the Ifo survey. The business confidence index fell to 100 from an unrevised 101.4 in September.

Leading indicators in Germany are providing evidence that recessionary risks in the German economy remain real and ever increasing. Meanwhile Spanish benchmark Yields rose above 5.7% level. Poor economic data will continue to weigh over the euro. Single currency may weaken further if today’s US Durable Goods orders release shows a better than expected performance. Further weakness in risk sentiment will see EUR/USD pair falling to its 200 Day MA around 1.2840.

GBP/USD: The GBP/USD is a bit stronger trading at 1.6044 ahead of today’s GDP read. The focus for the pound is on the GDP release. The pound is looking a little bit vulnerable at these levels. It wouldn’t be surprising if GDP came out below consensus and then the pound could fall. BOE Governor’s statement highlighting the central bank’s readiness to do more QE if recent positive performance of UK economy fades out in future is bearish for the pound. However markets now seem to focus on comparative strength of UK economy over EU. It is thus safer to initiate a buy trade in the pound against the euro. On the other hand, GBP/USD pair is vulnerable to risk on/risk off sentiment.

USD/JPY: The USD/JPY traded flat around 79.80 pushing the 80 price but unable to break through. Weak earnings in the US and Europe continue to weigh on the currency markets especially on the JPY. The greenback continues to rise, as eco data shows the US on the way to recovery. Wednesday morning’s Chinese PMI did little to support the JPY but eased the US dollar as traders looked for a bit more risk. This week’s widening trade balance will help push the BoJ into action. Traders are expecting the BoJ to at least double its current asset purchase plan to 10billion yen in its October 30th meet.