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Dollar Drops on Rebound in Risk Assets - HDFC Securities

* Indian Rupee expected to add gains after starting the week on front foot. The weakness in dollar index and rebound in risk assets could support the rupee bulls. A gauge for developingworld currencies climbed the most in three weeks as global markets embraced riskier assets, sending the dollar lower.

* Spot USDINR fell 18 paise to 74.21, lowest level after August 9. The pair has been placed below 50 DMA after June16 suggesting weaker trend. Momentum has been shifted lower indicating further weakness in coming days. However, the pair is still in range of 74.10 to 74.50.

* Indian officials on Monday detailed a plan aiming at raising money from the sale of state infrastructure assets over four years as Prime Minister Narendra Modi seeks to bolster the government’s finances and rein in a widening budget deficit. It is targeting to raise as much as 1.75 trillion rupees ($23.5 billion) in the year through March 2022 to make up for the pandemic-linked drop in tax revenue.

* The U.S. dollar fell for the first time in more than a week as equities advanced after U.S. regulators granted full approval to the Pfizer-BioNTech Covid-19 vaccine. The U.S. dollar was the worst performing currency among its Group-of-10 peers, followed by the Japanese yen, which also rallied last week.

* Stocks in Asia look set to open higher Tuesday after a boost to the U.S. vaccination drive allayed some concerns over the delta strain’s economic impact, lifting U.S. equities.

* At Jackson Hole, the outlook for the market will hinge on what Federal Reserve Chairman Jerome Powell says about the central bank’s bond-purchase program during a speech on Friday

USDINR

Technical Observations:

* USDINR August futures breached recent bottom (74.23) and 50% Fibonacci retracement support indicating bearishness. It pair has been facing resistance at 21 DMA.

* The pair has next support around 74, the Gap area and 61.8% Fibonacci retracement.

* Momentum oscillators and indicators on hourly and daily chart turned weak suggesting continuation of downward momentum..

* We expect USDINR likely to see level of 74 odd levels in coming days. The bearish view for the pair will negate only above 74.62.

* Short term traders should remain on sell side with stop loss at 74.55 while on downside expect level of 74 and 73.80.

USDINR August Daily Chart

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