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

Rupee gains in eight out of last nine weeks, all thanks to inflows and recovery in domestic economic activities. In the week gone, rupee closed at 73.07 a dollar up 18 paise or quarter per centage. A continuation of the recent moves in stocks and bond yields on the back of more sizeable US fiscal stimulus could help the dollar regain some lost ground against major trading currencies including EM currencies. Though, the technical setup and fund inflows back rupee while rebound in dollar index could spoil market sentiment in coming days.

Spot USDINR is having support at 72.75, low September 1 and resistance at 73.59, the 200 days simple moving average.

Indian Bond Market: The RBI drained two trillion rupees from the banking system via 14 days reverse repo auction in its first step to resuming normal liquidity operations. The benchmark 10 year bond yields up 8 bps to 5.95% in last week. Central banks will buy bonds worth 100 billion rupees on Jan.21.

Fund Inflows: Overseas investors bought worth $2.44 billion equities while sold $429 million bonds.

Forex Reserves: India’s foreign exchange reserves jumped up by around $758 million during the week ending 8 January to reach a record high of over $586.08 billion according the RBI weekly release.

Dollar Index gained in the week gone after Fed Powell made it clear “Now is not the time to be talking about exit. I think that another lesson of the global financial crisis is be careful, not to exit too early.

CFTC Data: Dollar selling was the story of the week, with FX longs increasing in every currency. The euro (12.9k), sterling (9.3k), and the Aussie (9.4k) were the notable beneficiaries of this flow, which took the aggregate dollar short to roughly $30 billion - an increase of three and a half years.

QE Progress: A second straight weekly decline left Reserve Bank Credit at $7.28 trillion, as interest bearing assets at the Fed slipped $25 billion sequentially and $69 billion from two weeks ago.

USDINR

USDINR January futures formed Doji candlestick pattern near recent bottom suggesting indecisiveness among traders

The pair has been trading well below short term moving average of 21 DEMA.

Momentum oscillators on daily and weekly charts placed near oversold zone and expected to show some recovery in coming days

Medium term trend remains down until pair closes above 73.60, the falling trend line resistance.

Short covering bounce can be seen in USDINR January futures in coming days with higher side resistance around 73.60 and support around 72.90.

EURINR

EURINR January futures closed below 50 DEMA, suggesting weakness in trend.

Pair has broken the ascending trend line support on daily chart.

The pair started forming lower top lower bottom sequence on daily time frame suggesting weakness.

Momentum oscillator, RSI of 14 days period heading southward suggesting weaker trend.

Momentum Indicator, MACD fell below zero line with negative cross over suggesting reversal in trend.

The pair has minor support at 88.50 and breaching of the same will open for 87.50 while 89.45 remains near term hurdle.

GBPINR

GBPINR January futures is holding support of short term moving average of 21 days.

It has upward slopping trend line (adjoining low of 93.33 and 97.34) and 50 DEMA support around 99.

Momentum oscillator, RSI of 14 days period hovering around 50 level and losing momentum, suggesting near term long unwinding.

Momentum indicator MACD and MACD Average line flatten above zero line suggesting consolidation.

The trend remains bullish until GBPINR January futures hold support of 99.10 while fresh rally can be seen only above 100.50.

JPYINR

JPYINR January futures formed small candles in last three days suggesting lackluster trading activities with overall direction remaining down

It closed slightly above horizontal line support of 70.50.

Momentum oscillator, RSI of 14 days period reversed from oversold zone, indicating short covering bounce in coming days. Though, the trend remains down following lower top lower bottoms and weaker MACD signal

We expect JPYINR January futures to trade in the box of 71.60 to 70.50.

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