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Calmness prevails ahead of FOMC decision

• The Indian Rupee could start the day on muted note ahead of July’s monthly expiry. The expiry could be lacklustre as the position remains light ahead of the FOMC policy decision later tonight. Asia currencies are mixed against the dollar and may weaken ahead of the FOMC interest-rate decision this week. The Fed is widely expected to raise the fed funds rate by 75bps and any upward surprise will bid well for the dollar.

• Asian shares retreated amid falls in Hong Kong and China, tracking a lower closing of US stocks Tuesday.

• IMF has warned the monetary tightening, Europe’s energy woes amid Russia’s invasion of Ukraine and China’s property sector and Covid challenges are among the risks darkening the global outlook. The agency has lowered the global growth to 3.2% for 2022 and 2.9% for 2023. They also lowered India’s growth to 7.4% and 6.1% for 2022 and 2023 respectively following unfavourable external environments.

• On Tuesday, Spot USDINR erased intraday losses and closed with gains of 5 paise to 79.78. Weakness in domestic equities, higher crude oil prices and a stronger dollar index weighed on the rupee during the day. The pair is having resistance at 80.10 and supports at 79.70 and 79.30.

• Open interest for USDINR contracts maturing today stood at $5.5b in July across NSE and BSE, while the August maturity contract has seen rising open interest at $2.56b. This number is substantially below June’s $8b indicating mute expiry with low volatility.

• The dollar gained, along with other haven currencies such as the Japanese yen and the Swiss franc. The euro slipped to the lowest in a week, underperforming most Groupof-10 peers, as traders focused on spiking natural gas prices in Europe on the prospect of reduced Russian supply.

• Ahead of FOMC meeting outcomes, 48% of all US Treasury Yield curves are now inverted as recession signals continue to mount.

USDINR

• USDINR August futures took support at 21 days exponential moving average and closed slightly above 13 days exponential moving average.

• The pair maintained the bullish formation of higher top higher bottom on the daily chart.

• Relative Strength Index of 14 days given negative cross over and exited from oversold zone indicating short term weakness.

• MACD has given negative crossover to average and histogram bar turned negative indicating weakness in the trend.

• USDINR August futures could continue to show long unwinding and may head towards 79.70 while on higher side crossing of 80.40 will negate the said view.

USDINR August Daily Chart

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