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Tight Range to Prevail Ahead of FOMC meets  -   HDFC Securities

Indian rupee enjoyed another week of gains even after stronger dollar, all thanks investors who poured money in the domestic primary markets. At domestic, after record inflows from Zomato IPO, there will be two more IPOs hit the primary market this week which could bring some extra flows while central bank may absorb the flows, these will be enough for local currency to fluctuate in range.

In the week gone, spot USDINR fell 15 paise or 0.21% to 74.41, chocked third weekly declines. The pair is having psychological support at 74 level while 74.95 acts as near term hurdle.

India’s forex reserves touched another land mark by rising $835 million to touch a record high of $612.73 billion in the week ended July 16, 2021, RBI data showed. On global front, a gauge of the dollar’s strength rose for a second week, with a bullish technical signal pointing to further gains along with fresh long buildup and month end hedging demand.

The pound is weaker after data showed Britain’s economy slowed in July as a resurgence of the coronavirus caused widespread staff shortages. As per the CFTC reports, dollar buying continued apace, and speculative position has now flipped from short $1.77 billion to long $2.2 billion. Selling was particularly evident in the euro (13.9k), sterling (11.4k), CAD (13.5k), and AUD (6.9k.) Other contracts saw little net flow.

The aggregate long dollar position primarily help against the yen and the Aussie. A chunky $95 billion weekly increase in Federal Reserve Bank Credit pushed the quantity of interest-bearing assets on the Fed balance sheet to a new fresh high of $8.174 trillion, that’s up 18.6% from a year ago.

The data buckets will remain full with month end data along with the US-China meets, US-Iraq PM meets and the most important Federal Open Market Committee meets where the pace of the Fed’s bond-buying program will be in focus.

USDINR

Technical Observations:

USDINR August futures closed below short term moving average of 21 days exponential, the first sign of weakness.

Though, the pair is still in bullish formation of higher top higher bottom on daily chart.

Momentum oscillator, relative strength index of 14 days period turned weak as it exited from overbought zone with negative divergence.

ADX line also heading lower and gap between +DI and –DI narrowed on daily chart.

The above technical evidences suggest USDINR August futures expected to swing in range of 74.25 to 75.35 and traders will find it difficult to get directional trend on month end adjustments.

USDINR August Futures Daily Chart

EURINR

Technical Observations:

EURINR August futures broken the recent low support and marked lower lows indicating continuation of bearish trend.

The pair is also pierced below short term moving averages on daily and weekly chart.

It has resistance of downward falling trend line resistance around 88.70 (as shown in side chart).

Momentum oscillator, relative strength index of 14 days period has been placed around 30 and about to enter in oversold zone suggesting continuation of weaker momentum.

EURINR August futures expected to trade with bearish bias and we could see level of 87.40, the gap of April 7 and resistance at 88.70.

EURINR August Futures Daily Chart

GBPINR

Technical Observations:

GBPINR August futures broken the horizontal trend line support of 102.90, confirming down ward action.

The pair has breached the support of 100 days simple moving average indicating weakness. Now, it has long term support at 100.90, the 200 days simple moving average.

Momentum oscillator, relative strength index of 14 days headed towards south and currently placed below 50 indicating weaker momentum.

ADX line has crossed +DI upward indicating quick selling momentum in the pair. We expect GBPINR August futures expected to trade lower and saw level of 101 in coming days while 103.20 becomes the resistance.

GBPINR August Futures Daily Chart

JPYINR

Technical Observations:

JPYINR August futures has rising trend line support at 67.40, the line adjoining low of 66.52 and 67.09.

The pair has broken the support term moving average support but holding trend line support.

It has been facing stiff resistance at 100 weeks moving average, currently placed around 68.75, which is coincidentally, 61.8% retracement of previous down swing from 70.10 to 66.52.

Momentum oscillator, relative strength index of 14 days period given negative divergence and placed below 50 level indicating weaker momentum in coming days.

JPYINR August futures expected to trade with bearish bias until it closes above 68.75 level while on downside we can see level of 67.30 and 66.80

JPYINR August Futures Daily Chart

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