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An Economic Downturn Spurred A Flight To Havens - HDFC Securities 

• Indian rupee could open with a loss following an overnight sell-off in risk assets. The forward markets suggest USDINR opening with a gain of 12-15 paise gain. On Wednesday, spot USDINR ended with gains of 2 paise to 77.58. Technically, the pair has been in an uptrend and could march towards 77.70 and 78.30.

• Overnight, US stocks had their worst day since June 2020, with declines spreading to Asian equities. Mounting fears of an economic downturn spurred a flight to havens including Treasuries. Oil also plunged on lower demand.

• Asian retail investors’ leveraged positions remain elevated well above their pre-pandemic levels but most equity accounts are still not in imminent danger of forced liquidations after being downsized in the recent market rout.

• The dollar snapped a three-day losing streak while the yen rallied as investors flocked toward safe-haven assets while they weighed how tighter monetary policy will weigh on economic growth in an inflationary regime. Bullish yen sentiment has been building in recent sessions as global growth comes under the microscope. For dollar-yen, the 127 level is worth keeping an eye on.

• The dollar is losing some of its yield appeals as inflation hurts the US consumer and share prices. Weakening that backstop is opening the door for other haven currencies like the yen and Swiss franc to outperform. The onemonth rolling correlation between the dollar and Treasury 10-year yields is on the verge of turning negative for the first time since the outbreak of the war in Ukraine.

USDINR

Technical Observations:

• USDINR May futures formed a small Doji Candlestick pattern after forming a bearish marobuza candle suggesting indecisiveness.

• The pair has been holding support around 77.30, the 13 DEMA and 61.8% Fibonacci extension adjoining previousswings.

• It has been trading in an upward sloping channel with resistance around 78.30 while support at 75.50.

• Relative Strength Index of 14 days period shifted higher and currently placed at 68, a few points away from the overbought zone.

• USDINR May futures could trade higher in today’s trade as a long position has been seen on Wednesday even after lackluster price action. The pair is having support at 75.50 and resistance in the area of 78 to 78.30.

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