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Dollar Pares Gain as Risk-on sentiments rebound - HDFC Securities

Indian rupee expected to open 10-15 paise higher when it starts after Wednesday’s holiday following pull back in dollar index and rebound in risk-on sentiments. While crude oil, though it recovers but still, remains below recent high.

Among the Asian currencies, China’s trade-weighted yuan basket index to 98.77, the highest since March 15, 2016, up 4.15% so far this year. Stronger Asian currencies likely to support rupee in near term. Spot USDINR expected to trade with negative bias in today’s session and expected to show level of 74.35.

On Tuesday, spot USDINR fell 26 paise to 74.62 following unwinding of position along with lower crude oil prices. Spot USDINR is consolidating in range of 74. 20 to 74.95.

So far this month, foreign institutions have sold worth $815mn equities while bought $43.5mn debt.

A gauge of the dollar fell for the first session in five as appetite for havens dwindled with Treasury yields and U.S. equities climbing. Commodity-linked currency led gains among their Group-of-10 peers. Ten-year Treasury yields headed back toward 1.3% as the recent rally in bonds fizzled.

Asian stocks look set to climb after solid company earnings boosted Wall Street, easing concerns about peak economic growth and coronavirus flareups.

Euro will remain in center stage for today’s forex market trading as traders will focus on ECB monetary policy statements. European Central Bank officials will outline today how their new inflation goal affects their intentions for future monetary policy. The discussion will pave the way for a critical debate in September on whether and how to withdraw emergency bond buying.

Technical Observations:

* USDINR July futures formed bearish candle after forming higher high.

* The pair is sustaining above 21 DEMA. It has been stuck in box of 75.10 to 74.50.

* The option distribution data suggesting max pain at 74.50.

* Momentum oscillators and indicators struggling near overbought zone while hourly chart showing exit from overbought zone indicating near term profit booking.

* USDINR July futures expected to consolidate in the range of 75.10 to 74.50 with medium term remaining up till it holds level of 74.30.

USDINR July Daily Chart

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