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Indian rupee depreciated for the sixth week in a row following weaker domestic equities amid foreign fund outflows - HDFC Securities 

* Indian rupee depreciated for the sixth week in a row following weaker domestic equities amid foreign fund outflows, a stronger dollar tracking higher US yields, and soaring crude oil prices on a supply crunch. The weaker regional currencies also added fuel to the fire for rupee weakness, which made a fresh all-time low in the week gone.

* Spot USDINR gained 21 paise to 77.84, last week. The bias for USDINR remains bullish as long as it trades above 77.50 while on the higher side it could face resistance in the area of 78 to 78.30.

* If we look at the carry trade, this year’s carry trade turned negative 2.68% from the previous year’s positive carry of 2.05% during the same period, this scenario is unfavourable for foreign institutions. The foreign institutions have withdrawn $23.87 billion fromdomestic equities and $1.83 billion fromthe debt market.

* In May, US inflation climbed to its highest level since 1981, rising 8.6% from a year earlier as measured by the Consumer Price Index, after jumping 8.3% in April. The reasons for surging prices are well known: Supply-chain disruptions due to the Covid19 pandemic led to shortages of goods; Russia's invasion of Ukraine hit the supply of key commodities, while at the same time the government directed trillions of dollars of aid directly to consumers and businesses.

* The dollar could continue to climb early in the week, as US yields rise ahead of the Fed meeting on Wednesday. If recent experience is any guide, looking at the past 5 Fed meetings, chosen to cover the period after front-end rates had started to reprice, Dollar Spot Index rose an average of 0.3% from the previous Friday’s close until the close prior to the Fed decision-rising on all 5 occasions. It gives up almost all of these gains by the end of the day following the decision -- falling on 4 occasions. While 2- year yield rises by 6bps and 10-year by 5bps in the run-up, but, on average, move no further after the decision.

USDINR Technical Observations:

* USDINR June futures closed at the life high and given an upward breakout from the last three weeks’ range.

* The pair has been holding the support of the 21-day exponential moving average on the daily chart.

* It has an upward sloping channel’s upper trendline resistance of around 78.70.

* Momentum oscillator, relative strength index of 14 days period has been hovering near oversold zone with upward direction indicating continuation positivemomentum.

* Directional movement index also adding strength in a current uptrend with +DI placed well above –DI.

* USDINR June futures is expected to trade with the bullish bias with higher side resistance at 78.70 and support at 77.60.

EURINR Technical Observations:

* EURINR June futures closed below 21 Days exponentialmoving average.

* On an hourly chart, it has started forming lower highs and lows while on the daily chart it still placed well above the previoustop of 87.08.

* Momentum oscillator, Relative Strength Index of 14 days given negative cross over and heading south indicating negativemomentum.

* MACD has given a negative crossover and heading towards the zero line indicatingweaknessin the trend.

* DMI also turned with +DI place below – DI indicatingweakness.

* EURINR June futures is expected to trade lower with downside support around 82 and 80.60 while on the higherside 84 remainsthe resistance.

GBPINR Technical Observations:

* GBPINR June futures closed below 21 days exponential moving average. The short-term moving averages are placed below medium-term moving averages suggesting a short-termdowntrend.

* Formation of head and shoulder pattern on an hourly chart with neckline support at 96.83 and pattern target of 95.30.

* Directional Movement index showing weakness with +DI placed below –DI and ADX line going down indicating a weaker trend.

* Momentum oscillator, RSI has been placed below 50 levels and heading towards oversold zone indicating negativemomentum.

* GBPINR June futures is expected to trade lower with downside support at 95.30 and resistance at 98.40.

JPYINR Technical Observations:

* JPYINR June futures started trading in the bearish sequence of the lower top lower bottomon majortime frames.

* The pair is having support at 57.10, the Fibonacci extension level adjoining high of 67.17, low 58.71 and high 61.31.

* Momentum oscillator, Relative strength index of 14 days currently placed in oversold zone and further weakening indicating bearish momentum.

* Directional movement index is indicating negativity with +DI placed below –DI and ADX line heading north indicating strong bearish trend.

* MACD is given negative cross-over and placed below zero line indicating bearish trend.

* JPYINR June futures is expected to trade lower with support at 57.10 and resistance at 59.77.

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