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Rupee Drops as Virus Spikes - HDFC Securities

Rupee remained under pressure and pricing in weaker domestic economic data reflected by foreign fund outflows. In the week gone, rupee lost 0.89% or 92 paise to 75.02 a dollar. Forex market traders are worries about higher deficit and inflation along with downward revision of current year GDP following restriction/lockdown by many state governments after sharp surge virus cases. However, risk market rallying following better than expected economic data from developing nation and Indian equity markets also catching up with it sidelining the surge in virus cases.

Rupee is expected to trade volatile within the range in coming days following rising cases which could weigh on sentiments and weaker dollar index along with central bank’s interventions may limit the downside. Technically, spot USDINR is having support at 74.50 and resistance at 75.50.

RBI ended up selling fewer bonds than planned for a second straight week. The central bank sold 220b rupees of bonds as against 320b rupees planned on Friday. It scrapped all bids for a five-year bond after it had rejected all bids similarly for the benchmark 10-year bond last week. Traders now speculate that the sharp increase in virus cases means the government will have to spend and subsequently borrow more and in turn demanding for higher yields

The dollar index fell 0.79% to 90.83, a level not seen since early March, after the euro climbed a percentage point to $1.21, pushing through its earlier high for the week. One driver of the greenback’s recent decline is the falling real yields. The gain in euro attributed after European purchasing managers' index for April come in better than expected, supporting the view that the region's economic recovery is accelerating. The dollar’s downward trend is likely to continue, unless the Fed changes its tone in this week’s policy meeting.

The week ahead is a very busy one on the data calendar. It should encompass with Euro area and US GDP along with BoJ and FOMC meeting. A Fed likely to position very dovish at Wednesday’s FOMC meeting. While the market focus will remain on Joe Biden’s first speech to a joint session of Congress, where we might hear more about his plans to raise taxes, including a doubling of the capital gains tax for those earning over $1mn p.a.

USDINR

USDINR May futures formed candle with small body and bigger lower shadow suggesting bullishness in the pair. However, it is facing resistance around 75.80 odd levels.

The pair is having is having support at 74.63, the 21 days exponential moving average and resistance at 75.80, recent high.

Momentum oscillator, stochastic has been hovering in overbought zone and expected to form negative divergence suggesting near term consolidation.

We expect USDINR May futures to consolidate in the range of 75.80 to 74.60 in coming days. The pair may witness near term profit booking while trading above 75.80 will give fresh breakout and any level around 74.50 may act as bargain buying level

EURINR

EURINR May futures closed above weekly doji candlestick pattern suggesting bullishness.

The pair has been trading well above short term and medium term moving averages.

The pair is having rising trend line support at 90.50, adjoining low of 86.67 and 89.43.

Momentum oscillator, stochastic placed in overbought zone while the price remains higher and no sign of negative divergence indicating continuation of upward trend.

We turn bullish for EURINR May futures and expect current upward momentum could continue in coming week with higher side resistance at 91.50 and support at 89.50.

GBPINR

GBPINR May futures formed doji candle with bigger lower shadow suggesting bullishness. The pair is holding support of 21 DEMA at 103.20.

Short term trend for GBPINR May futures remain bullish till it holds the rising trend line support of 104 level.

Momentum oscillator, stochastic given negative cross over in overbought zone which could slow the momentum but bullish trend remain intact until it breaks below 104 level.

We hold our bullish view for GBPINR May futures and expect 105.50 level in coming days while on lower side 103.80 remains trend reversal level.

JPYINR

JPYINR May futures formed doji candlestick pattern on Friday suggesting indecisiveness after recent rally

The pair is trading well above short term moving averages. Recent, upward price movement were supported by the volume suggesting bullishness

Momentum oscillators and indicators on daily chart remains strong and placed in overbought zone. We expect overbought condition on hourly chart may give short term pause in upward momentum but the trend remains up following higher highs and lows on daily chart

JPYINR May futures expected to hold support of 68.67, the 21 DEMA and resist around 70.80.

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