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Dollar Gains on Haven Demand - - HDFC Securities

* Indian rupee expected to drift lower in opening trade following overnight gains in dollar against major trading currencies and risk-off tones. The dollar extended gains against all of its major developed- and emerging-market peers amid mid-month rebalancing flows and after U.S. economic data pointed to an uneven recovery. U.S. dollar is likely to remain well bid over the coming weeks with virus concerns reaching a tipping point

* Asian stocks look set to come under pressure after U.S. equities suffered their worst drop in a month on concern that a resurgent coronavirus will hurt the economic recovery. Rupee started the week on back foot with currency depreciated by 10 paise to 74.35 a dollar mainly on back of weaker Asian peers and dollar demand from oil marketing companies.

* Technically, spot USDINR is expected to show short covering bounce in today’s trade amid oversold condition in hourly and daily chart. The pair has resistance at 74.60 and support at 74.20.

* ICE dollar index last quoted at 93.11 with gain of 0.4% after Indian market closed. Euro and the offshore yuan is near a two-week low against the greenback because of rising virus concerns in China.

* The major U.S. stock indexes slumped on Tuesday, as the Dow Jones Industrial Average and the S&P 500 snapped five-day winning streaks. Elsewhere, Crude oil held losses, pressured by the rising dollar and the uneven U.S. recovery.

* U.S. retail sales undershot forecasts in July suggesting a softer of consumer spending growth in coming month. Retail sales for July fell 1.1%, slumping below estimate of a 0.3% decline and dropping below the upwardly revised 0.7% gain in June.

*Treasury Secretary Janet Yellen rejected criticism that the administration’s two-track legislative push for major spending bills on infrastructure and social programs amount to “overinvesting”.

USDINR

Technical Observations:

* USDINR August futures formed bullish candlestick pattern after Doji candlestick patter on daily chart. The implication of it is bearish reversal and pair could head towards upper range to 74.65.

* The pair has took support of 50% Fibonacci retracement level adjoining recent rally from 73.20 to 75.35.

* Momentum oscillator, relative strength index of 14 days period heading north and currently placed at 45 suggesting bullish momentum.

* USDINR August futures expected to open higher and could get resist around 74.70 while 74.20 remains strong support.

USDINR August Daily Chart

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