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Equity Markets Popped up on Expectation of Debt Ceiling Agreement - HDFC Securities 

Rupee expected to open higher after overnight plunges in energy prices and rebound in equities. Asian stocks look set to climb after progress on the U.S. debt-ceiling impasse lifted equities on Wall Street. The dollar hovering around 94 odd levels and Treasuries were steady as traders await key American jobs data.

The one month forward USDINR last quoted at 75.12 down by 12 paise after our market closed. The pair likely to open lower and expected to show long unwinding after sharp surge in last couple of days.

Spot USDINR marked biggest single day fall after June 17, amid surge in crude oil prices, widening trade balance and worries over rise in inflation. The pair closed at 74.99 just a paise away from 75 with loss of 53 paise or 0.72%. Technically, it has been in up trend and sustainable trade above 75 will open for 75.35 and 75.50 level while 74.60 acts as support in near term.

Higher oil prices and coal shortages risk fanning inflation and slowing economic growth in India ahead of a central bank meeting, while punishing the nation’s currency and bonds. Market participants will eye on RBI’s interest setting committee, due to announce its decision on rates on Friday. Although economists expect it to keep the benchmark repo rate unchanged at 4%, The RBI may hike the reverse repo rate to 3.5% from 3.35% now.

On Wednesday, the dollar held on to gains against most Group-of-10 currency peers even as some investor focus shifted to rising prospects that U.S. lawmakers can reach an agreement to raise the debt ceiling and stave off the immediate risk of a default.

Technical Observations

USDINR October futures given golden cross over as 50 DEMA crossed 200 DEMA on daily chart, the first sign of bullish trend.

The pair also closed well above falling trend line resistance placed at 74.75.

Momentum oscillators and indicators on daily and weekly chart remained strong indicating bullishness for the pair.

Looking at the overbought condition on hourly chart, we expect profit booking can be seen in today’s session.

Medium term bias for the pair remains bullish till it holds support of 74.30 while on higher side one can see 75.50 in coming weeks.

USDINR October futures expected to find support around 74.80 and resistance at 75.25.

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