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All Eyes will be on RBI Policy - HDFC Securities 

• Rupee expected to open higher ahead of central bank policy decision as risk assets recovered and US bond yields declined. However, soaring crude oil prices and foreign fund outflows could weigh on the rupee. Technically, the pair is expected to trade in the range of 77.90 to 77.30.

• On Tuesday, the Indian rupee fell 8 paise or one-tenth of a percentage to 77.71 as crude oil prices surged and equities weaken.

• The Reserve Bank of India looks set to deliver another outsize rate hike in June to try to cool inflation. RBI expected to raise the repo rate by 50 basis points to 4.9% at today's review following its 40-bp hike in May. We expect policymakers to lift the rate to 5.75% by December 2022. Even as it hikes, the RBI is likely to emphasize its stance and remains supportive of the growth. RBI Governor Shaktikanta Das stated in a recent interview that rate hikes in June were a "no-brainer.“

• Asian equities will be looking to build on the positive US session, which included a 3.3% gain for the Nasdaq Golden Dragon China index. Recession fears after the World Bank further cut its 2022 growth forecast drove bond yields lower with a flattening of the Treasuries curve.

• The dollar was mixed against its Group-of-10 peers as the benchmark 10-year Treasury yield slid for the first time in six days. Meanwhile, the yen slumped to a fresh 20-year low as Bank of Japan Governor Haruhiku Kuroda reiterated his mantra of continued easing to support the economy. The yen’s historic weakness is spreading from the dollar into other currency crosses as the Bank of Japan’s policy isolation grows. The dollar index, a basket of six currencies, was last quoted at 102.53 down 0.2%.

• Elsewhere, Crude oil prices pushed higher to end the session at $121/bbl the highest level since March amid strong fundamentals.

• World bank reduced its estimate for global growth this year to 2.9% from a January prediction of 4.1% and April’s 3.2% estimate due to a surge in energy and food prices, supply disruptions triggered by Russia’s invasion of Ukraine and a drive-by central banks globally to increase interest rates from rock-bottom levels

USDINR Technical Observations:

• USDINR June futures closed above high of Doji candlestick pattern and strongest level of the life time indicating continuation of up trend.

• The pair has been holding support of 21 days exponential moving average currently placed at 77.56.

• Derivative data indicates long buildup with rise in price and open interest. Volumes were also surged ahead of event. However, the volatility remained low, which is rare ahead of events.

• Relative Strength Index of 14 day turned positive and moved north after today’s price actions.

• In the near-term, USDINR June futures is expected to trade in the range of 77.50 to 78.10 with bullish bias.

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