Buy US$INR November future at 70.80 – 70.90, Target: 71.80, Stop loss: 70.0 Rationale:
The rupee ended October at 70.92 vs. the US$, recovering from lows of 71.71 as strength in Chinese Yuan and soft oil prices countered growing concerns over the possibility of domestic fiscal slippage. Positive sentiment due to the likeliness of US-China signing first phase of trade deal coupled with stable and lower oil prices has helped the rupee appreciate in October. On the other hand, domestic corporate tax rate cuts and shortfall in government revenues are increasing concerns over the possibility of fiscal slippage. September retail inflation rose to 3.99%, which could weigh on RBI’s rate cut prospects. Hence, we see limited appreciation for the rupee. Declines in the pair should be utilised to initiate long positions.
Buy EURINR November future at 78.30 – 78.40, Target: 79.60, Stop loss: 77.50 Rationale:
Euro ended October with gains of over 2.3% as improving risk sentiment coupled with profit booking in US$, boosted prospects for Euro. It its ended three month losing streak and attempted to rise towards its key hurdle at 1.12. We expect Euro to trade in the range of 1.09–1.125 vs. US$ in near term. However, due to relative weakness in the rupee vs. US$, we expect that EURINR to remain supported. As such, declines in the pair should be utilised to initiate longs for target towards 79.6 levels.
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