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Rupee Outlook and Strategy

• The US dollar rose 0.18% on Tuesday as stronger than expected manufacturing production and NAHB housing report pushed the treasury yields higher. Further, hawkish comments from Fed members gave the dollar a boost. The retails sales numbers also supported the dollar as it showed improvement in consumer spending

• Rupee future maturing on May 29 appreciated by 0.09% on Tuesday amid strong inflow into the domestic market

• The US$INR is likely to appreciate amid softening of crude oil price and persistent FII inflows. However, sharp gains in the rupee could be prevented as investors will keep an eye on outcome from the US debt limit negotiation. For the day, US$INR is expected to face a hurdle near 82.40 and move back towards 82.10. Only a move above 82.40 would weaken the rupee towards 82.54

Euro and Pound Outlook

• The Euro failed to hold its gains and closed with a loss of 0.12% on Tuesday amid weaker German ZEW economic sentiments. The German ZEW survey expectations of economic growth index fell more than expected to a 5-month low. However, losses in the pair was limited on hawkish comments from ECB Governing Council member Holzmann. He said that the ECB needs to raise its deposit rate above 4% to tackle inflation

• The Euro is expected to face resistance near 1.09 and move back towards 1.0845 on firm dollar and weak global market sentiments. The weakness in the oscillator RSI (44) could limit it to go beyond 1.090. Further, breakdown of the 50 day EMA would also weaken it towards 1.0845. EURINR is expected to face the resistance near 89.75 and slide towards immediate support of 89.20

• The pound fell on Tuesday, after the UK unemployment rate raised for the first time in last eight months. Further rise in jobless claims numbers also took some pressure off the BOE to hike the rates in its next meeting

• The pound is expected to trade on a weaker note, as there is little room for the BOE to increase the rates. The weaker Job numbers will certainly raise the doubts on economic recovery. The pound is trading below the 20 day EMA at 1.2530, which could act as key resistance. On the downside 1.240 holds as immediate support. The reversal in RSI would weigh on the pound to trade with a weaker bias. GBPINR is expected to face the resistance near 103.20 and slid towards 102.50

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