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Risk aversion to weigh on Rupee

Rupee expected to open lower following overnight gains in dollar, risk aversion and concern over new variant of virus found in India. The non deliverable forward USDINR last quoted at 73.85, 8 paise higher from yesterday’s 5pm IST. 

Indian rupee rises for a third straight day to its highest in more than a month as stocks climb and a weaker dollar supported emerging Asian currencies. Local currencies gained on softer dollar, fund inflows and weaker import demand as restrictions were imposed by many state government. USD/INR fell 0.2% to 73.35, the lowest since April 5 while S&P BSE Sensex Index advances for a fourth day, rising 0.6%.

Technically, spot USDINR is expected to see some short covering following oversold condition on daily chart. The pair is expected to resist around 73.67 while could hold support of 73.20 in today’s trade.

A gauge of the dollar rose for the first time in five days as expectations for quicker inflation in U.S. data this week and the World Health Organization’s concern over a new Covid variant boosted demand for haven assets. The surge in commodities in recent days is intensifying debate ahead of the U.S. CPI report Wednesday that is forecast to show a gain in April. WHO classified the B.1.617 Covid 19 variant from India as a global concern.

Asian equities are set to follow U.S. peers in selling off ahead of reports that will show a jump in annual inflation thanks to base effects amid the post-pandemic economic rebound. U.S. CPI is expected to accelerate in a way rarely seen since the 1980s, so there’s an argument to be made that taking cash off the table makes sense. Core CPI is forecast to climb 7Obps -- the most since 1981. With soaring commodities prices, transport costs and supply shortages, it's not hard to see inflation risks everywhere.

Technical Observations:

USDINR May futures formed Doji candles between 50 and 100 DMA, _ indicating ; indecisiveness among traders. 

Monday’s candle will be make or break candle with crossing of high 74.68 will reversal while breaking of 73.48 will dragged pair towards 73.05 level.

Momentum oscillator, RSI about to enter oversold zone suggesting slower momentum.

We Exept Short Covering Bond in today Cortrol trade and crossing of 73.68 level will open door for 73.82 while breaking below 73.48 will nullify the view.

USDINR May Daily Chart

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