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Dollar Rises as Traders Await US Inflation Data - HDFC Securities 

• Indian rupee is expected to open steady but strength in the dollar index and risk-off sentiments could weigh in the second half of the session. On Tuesday, spot USDINR fell 14 paise to 77.32 amid central bank’s intervention and lower crude oil prices. Technically, the pair is still in an uptrend and a level above 77.70 clears the path for 78 while on the downside the support has been shifted to 77 and 76.70.

• Asian stocks were steady and U.S. equity futures rose Wednesday ahead of US data that will help gauge whether price pressures are peaking amid concerns about economic risks from inflation. Meanwhile, Oil was below $100 a barrel after shedding about 10% this week. Growth concerns driven by China’s Covid lockdowns are sapping crude and metals.

• China’s inflation numbers significantly exceeded expectations. This limits policymakers’ space for a sizable stimulus in response to the Covid-induced slowdown. April headline CPI rose to 2.1% y/y from the expectation of 1.8%.

• A gauge of the greenback rose as investors digested comments from several Federal Reserve speakers ahead of US inflation data on Wednesday. The ICE dollar index, the basket of six currencies, rose 0.31% to 103.93 ahead of inflation data. Bloomberg Economics estimates April’s CPI rose 8.0% year-overyear, making it likely that March’s 8.5% result proves the high for the current cycle.

• Fed officials reinforced Chair Jerome Powell’s message that half-point hikes are on the table in June and July. But Cleveland Fed President Loretta Mester told Bloomberg Television that “we don’t rule out 75 forever,” referring to a more aggressive, three-quarter-point increase.

USDINR

Technical Observations:

• USDINR May futures took resistance at 77.71, the 76.4% Fibonacci extension level adjoining low 74.38, high 77.33 and low 75.46.

• The pair is expected to consolidate in the range of 77.30 to 77.70.

• The pair has been trading in rising channel with resistance around 78.30, and support at 75.50, as shown in side chart.

• Relative Strength Index of 14 days period slightly weaken after touching overbought line of 70.

• +DI is placed above -DI upward and ADX line flattening indicating positive trend.

• USDINR May futures expected to trade higher with resistance at 78.30 and support at 77.30.

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