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Dollar down as risk recovers after Powell says rate hike “a ways away”  - HDFC Securities

Indian rupee expected to open flat in line with other Asian peers and expected to add gains following weakness in dollar index and rebound in risk sentiments after FOMC meets and Chinese regulators calms the investors nervous. On Wednesday, spot USDINR fell 9 paise to 74.38, snapping two days gains following strong dollar inflows on month end adjustment and weaker dollar index.

Technically, the pair is expected to head towards swing low of 74.25 while 74.75 will act as near term hurdle. The dollar fell after briefly climbing following the Fed statement. Fed Chair Powell said during his press conference that despite the economy’s progress, an interest rate hike was still “a ways away.”

The Fed said it’s made progress towards reaching its employment and inflation goals, and they will “continue to assess progress in coming meetings.” Using the plural - “meetings” – rules out September for an official announcement for tapering, and Nov/Dec seem to be the most likely time frame, just is most investors are expecting. Powell also downplayed the risk of the Covid variant, saying the impact of this wave is likely to be smaller given the low hospitalisation.

Asian stocks look set to rise after the Federal Reserve said more economic progress is needed to start tapering substantial stimulus. Meanwhile, Oil prices received a fillip after data showed U.S. crude inventories fell more sharply than analysts had forecast, overshadowing worries that a resurgent pandemic might hit demand.

Chinese equities rebound after China’s securities regulator convened a virtual meeting with executives of major investment banks on Wednesday night, attempting to ease market fears about Beijing’s crackdown on the private education industry.

USDINR

Technical Observations:

* USDINR August futures drifted further lower on expiry day and closed below short term moving averages.

* It has broken the support of previous bottom in intraday but manages to close slightly above previous bottom.

* Momentum oscillators and indicators stayed weak on hourly and daily chart indicating continuation of downward momentum and trend.

* USDINR August futures has now support at 74.40 and resistance at 74.80.

* The bias pair remains bearish until it closes above 74.80.

USDINR August Hourly Chart

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