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Rupee Likely To Open Lower On Risk-off Moods - HDFC Securities 

Indian rupee consolidated in small range for another week and marked 3 paise gain to 72.93 a dollar. Foreign funds remained net buyer in the domestic equities and debt market in the week gone. They bought $2.07 billion equities and $54.6 million debt. Even after two big events, Union Budget and Monetary policy, rupee manages to close with gains and one of the out performing currencies among Asian baskets.

The domestic equity benchmark index touched life high after RBI monetary policy. India’s central bank kept interest rates on hold, while assuring markets of ample liquidity to manage the government’s near- record borrowing.

Going Ahead, spot USDINR is expected to trade with negative bias and may touch September low of 72.75 in coming week. While on higher side 73.25 and 73.50 remains the supply area.

Forex Reserves: India’s forex reserves rose $4.85 billion to touch a record high of $590.18 billion in the week ended January 29, as per the weekly RBI release.

Dollar ended the week with half a percentage gain to 91.04 mainly on back of short covering. Pound has been the best performing G10 currency last week, helped by the BoE meeting that have further reduced the odds of negative rates. We expect Euro and other low-yielder Japanese Yen may struggle to recover, while Pound could remain a key outperformer in coming days.

In last couple of days, we have seen positive correlation between dollar and equities, which reversed on Friday after job reports. The weakening of the USD-equities inverse correlation was partly due to some squaring of dollar positions, according to CFTC data.

CFTC Data: There was a reasonable liquidation of euro longs with net selling totaled 28k contracts, the biggest unwinding in two-and-a-half years (23rd June 2018). While Sterling (1.6k), Swissie (4.5k) and CAD (2.3k) all saw reasonable net buying, but overall the aggregate dollar short on the fell by $3 billion during the wee

USDINR

USDINR February Futures formed candle with small body suggesting tiredness by bulls and bear. Short term trend remains bearish amid lower peak and trough on daily chart. Near term resistance is placed at 73.40 odd levels while 72.75 will act as support.

Momentum oscillators and indicators turned weak on daily chart while weekly chart suggesting weaker trend.

Option Distribution data suggest maximum pain level of 73 while writing on 73.50 and 72.50 put will act as near term resistance and support, respectively.

Looking at the above evidences, we remain bearish and looking for 72.75 on downside while any level of 73.50 will negate the view.

EURINR

EURINR February futures formed Doji candlestick pattern suggesting indecisiveness among traders.

The pair has retraced 4% from the top of 90.98. It is expected to witness short covering bounce from 87.30, the 23.6% Fibonacci retracement adjoining low 77.24 and high 90.98. While higher side we could see resistance around 88.40 (the target of double top and Nov.24 low)

Momentum oscillators and indicators on daily as well as weekly chart suggesting oversold and weaker momentum.

We expect short covering bounce in coming days before heading lower towards 86.87 (200 DMA). Short term traders should cover short position and wait for bounce to make fresh short.

GBPINR

GBPINR February futures given false breakdown of rising trend line and 50 DMA on Thursday on BoE policy meet day. On next day, it manages to rebound and closed above trend line and 50 DMA, but slightly below 20 DMA. This indicates bulls are still in the game.

Momentum Oscillator, RSI is placed around 50 odd levels and turned upward suggesting continuation of upward momentum.

We remain bullish in pound and expect outperformance against Euro and Dollar.

Short term traders should look for 100.50 and 101.10 levels by keeping stop below 99.25 odd levels.

JPYINR

JPYINR February futures fell for the seven week in row and reached the lower band of the rectangle pattern (In formation since April 2020)

There is negative cross over of moving average, short term moving averages are placed below long term averages suggesting down trend in the pair.

While momentum oscillators on daily and weekly chart are highly oversold suggesting short covering bounce.

Looking at the daily and weekly technical indicators and patterns, we could see short covering bounce up to 70.25 level. Short term trader should cover short around 69 odd level and re-enter sell around 70.25 for target of 68.80.

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