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

Indian rupee continued north bound journey in January as well and marked the third weekly and third monthly gains. However, the range remained narrow following low volatility and volume in USDINR. The pair oscillated between 72.90 to 73.50 through the month. Trading momentum switched from dollar to pound, which saws higher in volatility, volume and price swing. January Month: Spot USDINR ended the month with loss of 12 paise to 72.95 following massive dollar inflows through FPI and FDI routes. The pair remained under pressure as central bank absorbing dollar inflows and recovery in domestic economic activities. Fund Inflows: FPI bought more than $3 billion in domestic equities and FDI inflows also touched the record number. As per the Ministry of Commerce & Industry, India has total Foreign Direct Investment (FDI) inflow was recorded at $58.37 billion during April to November, 2020. It is the highest ever for first 8 months of a financial year and 22% higher as compared to first 8 months of 2019-20 ($47.67 billion). India Forex Reserves: India forex kitty up $4.49 billion to $585.33 billion in the month of January 2021, this was the 10th month in trot following central bank’s aggressive dollar buying. Technical: Spot USDINR is at tactical turning point as breaking of 72.70 will lead to further downside while rebound in dollar index could turn the table. One should eye on 72.70 on downside and 73.50 on higher side for clear trend breakout, which likely to be confirmed after RBI policy meeting of February 5. Month Ahead: Historically, February is considered to be a month of high volatility following Union Budget and central bank policy meeting. So far as price action is concern, there are 60% chance of spot USDINR falling as 6 out of last 10 year has been given negative return with the swing movement ranging between -1.5% to +2.5%. Global Markets: Dollar has had a strong month versus most peers as a changing risk environment restored safehaven demand for the greenback. The market started digesting the ultra-loose monetary policy as treasuries back above 1% while global equities moved away from all-time high. EURUSD has held above the 1.2100 level but closed month with loss of 0.65%, showing dollar-buying pressures and unencouraging contagion data in Europe. Technical setup of all major pair area at a crucial juncture where make or break decided by crossing upward or downward break of the line. The first week of February will remain crucial for the short-term trader for decision making.

USDINR

USDINR near month futures has horizontal trend line support at 72.60.

The pair closed well below short term and medium term moving averages on weekly chart

Momentum oscillator, Relative Strength Index of 14 weeks period about to give positive cross over and placed below 50 level.

Directional Movement Index suggests consolidation as gap between – DI and +DI narrows.

The above technical evidences suggest bearish momentum with strong support of 72.60 and breaching of the same will lead to further sell-off while crossing of 74 negate the view.

EURINR

EURINR near month futures has support of 20 Weeks Moving average and rising trend line support at 88.40.

Formation of higher top higher bottom intact on daily and weekly charts, suggesting continuation of up trend.

Momentum oscillator, Relative Strength Index of 14 weeks given negative divergence and exited from overbought zone suggesting short term reversal.

Looking at the above technical evidences, we recommend cutting long only below 88 levels while higher side we may see resistance around 90.50

GBPINR

Bull rides continues in GBPINR futures as it touched new high of the year. Momentum remains on bull side as we can see the higher top higher bottom formation and pair sustaining above short term and long term moving averages.

Momentum oscillator, RSI stays above sub 60 levels and heading towards overbought zone suggesting continuation of upward trend. Though, there are brighter chance of negative divergence as pair making new high while RSI lagging behind.

We remain bullish in GBPINR future until it breaks the level of 98 while on higher side above 100.40 we can see 102 level.

JPYINR

JPYINR futures broken the short term moving average support on Weekly chart but the momentum remains on positive side till it holds the support of trend line and 55 Weeks Moving Average placed at 69.55

The pair is still in broad range of 69 to 72, the weakness in oscillators hinting for downward movement.

Momentum oscillator, RSI of 14 weeks heading towards south with negative cross over and placed below 50.

We remain neutral until JPYINR futures breaks the support of 69.55 while higher side also capped around 72.

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