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Dollar to bid well ahead of Long Weekend and Key Economic Data

• The Indian rupee is expected to open flat but with gains in crude oil price, dollar demand and dour risk assets, we might see pressure ahead of a long weekend and crucial economic data. The July retail prices might be lower than the previous month’s 7.01% but remains above RBI’s tolerance level. While industrial output might come around 10% below the previous reading of 19.6%.

• On Thursday, the relentless dollar buying drifted the USDINR higher till the end, even after the spot market closed at 3:30 pm. The pair open lowered following an overnight fall in the dollar index but recovered all losses and ended with gains of 12 paise to 79.64. We believe RBI might have bought dollars as the forward premium inched higher. However, the dollar index remained weak and such kind of strength in USDINR might not sustain and we could see a reversal in the coming days.

• Technically, spot USDINR is having support at 78.85 and resistance at 79.90. The shortterm trend remains neutral while the long-term trend remains bullish as long as it trades above 78.50.

• The dollar was mixed against its Group-of-10 currency peers Thursday as traders weighed an improvement in risk appetite against odds that the Federal Reserve will stay on its rate-hiking path, even if economic indicators suggest moderating inflationary pressures.

• In the latest US central banker comments, San Francisco Fed President Mary Daly said inflation is too high, adding she anticipates more restrictive monetary policy in 2023. She said her baseline is a half-point September hike but that she’s open to 75 basis points if necessary.

• Stocks this week have cheered the possibility that ebbing price pressures will take the pressure off the Fed to keep hiking rates sharply, making a soft economic landing more likely. Global shares are set for the longest streak of weekly gains since 2021, paring their retreat this year to about 14%.

USDINR

Technical Observations:

• USDINR August futures facing stiff resistance at the middle band of the Bollinger band.

• The pair is having upward slopping trend line support near 79 which is a coincidentally lower band of the Bollinger Band.

• The pair is meandering around 13 days exponential moving average for the last five days.

• Relative Strength Index of 14 days oscillating around 50 indicating consolidation in the near term.

• Long buildup has been seen with the rise in price, open interest and volume.

• USDINR August futures could consolidate in the range of 79.30 to 79.85.

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