Record Forex Reserves and US China Trade Hopes to Ignite Rally - HDFC Securities
* Indian Rupee expected to start next week with gains following risk on sentiments on hope of US China trade deals and dollar buying by the central bank.
* China’s Xinhua said the world's two largest economies had reached a "consensus on principles" during a constructive telephone call on Friday between their main trade negotiators.
* India’s forex reserves touched new lifetime high of $442.583 billion in the week ended October 25, helped by a jump in core currency assets and value of gold.
* Since March RBI has added whopping $29 billion and more than $10 billion in last one month.
* Rupee remains competitive in REER terms and also ensuring adequate FX reserves to cover for our external liabilities.
* On Friday, RBI announced Longer Term Repo Operation and Cash Management Bills issuance to drain liquidity from the banking system which is currently in a surplus of around Rs.2.5lakh cr.
* Central bank will auction Rs.25000 cr on 04 Nov and Rs.25000 cr on 07 Nov to absorb liquidity from the market.
* USDINR one month forwards last quoted at 70.70 a dollar from 71 a dollar when our market closes.
* Technically, Spot USDINR is having support at 70.70 and 70.30 while continue to resist at 71.06
Fed Balance Sheet Expansion Will Weigh On Dollar
* Federal Reserves started increasing its balance sheet by buying up bonds and Treasuries as a way of pumping cash into the market. That in turn makes bond yields drop as the bond prices rise. The dollar usually weakens when bond yields fall.
* ICE dollar index has broken the 200 DMA support and previous bottom of 97.14. Technically, it is turning weak and selling below 97 would open for next level of 95 while continue to resist at 98.
USDINR NOV. FUT.
* USDINR November futures forming lower highs and lower lows on daily chart.
* The pair has been consolidating in small range of 71.30 to 70.85. The prior trend is indicating continuation of down trend.
* Momentum oscillators and indicators showing weakness on daily and weekly charts.
* We recommend short sell below 70.80 for target of 69.70 with stop loss of 71.60.
USDINR November Futures: Sell Below 70.80 SL 71.60 TGT 69.70
EURINR NOV. FUT.
* EURINR November futures has falling trend line resistance at 79.75 The pair manages to close above short term moving averages.
* Momentum oscillator, RSI has given positive cross over and heading higher indicating possible upward breakout.
* The long term EURUSD downtrend has been reversed above 1.29.
* Short term traders can initiate long above 79.75 for target of 81 keeping stop loss at 78.70.
EURINR November Futures: Buy above 79.75 SL 78.70 TGT 81.00
GBPINR NOV. FUT.
* GBPINR November futures trading near four month high and trading bullish sequence of higher highs and higher lows on daily chart.
* Momentum oscillator, relative strength index hovering near overbought zone. GBPUSD has been well placed and trading above 1.1180 will add strength in recent rally.
* We believe the current up trend can continue in coming days with higher side resistance at 93.90 and support 90.90.
GBPINR November Futures: Buy above 92.30 SL 90.90 TGT 93.90
JPYINR NOV. FUT.
* JPYINR November futures has been trading in downward channel with resistance at 66.45.
* The pair is forming lower highs and lows on daily chart and placed below short term moving averages.
* Momentum oscillator, RSI heading towards oversold zone. USDJPY is having rising trend line support at 107.85.
* Short term bias for JPYINR remains bearish with downside support at 65 and resistance at 67.45.
JPYINR November Futures: Sell around 66.45 SL 67.45 TGT 65.05
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