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Focus Remains on Central Bank Policy Decision & Germany Election - HDFC Securities 

The recent dovishness of US Fed has led to a pull back in the dollar and a rally in EM currencies. August turned out to be one of the best months this year for rupee as we have seen 74 to 74.50 range breakout, after struggling more than two months for clear direction. Rupee gained 1.90% to 73.01 a dollar level in August after flattish close in previous month. Technical set-up remains bullish for rupee and level above 72.70 opens for 72.30 while on lower side 74.10 act as strong support.

Foreign institutions have made investment $2.23 billion during August by way of equities and debt. Country’s forex kitty up by $12.98 billion in August following revision of SDRs by IMF and central bank’s dollar buying.

September is expected to be a busy for the primary market as several public issues are in the pipeline. There are 6-10 public issues that could open for subscription in September which will add the numbers dollar inflows. Data dockets for September remains heavy and the markets focus shift from Covid19 to overseas, as central banks (ECB, Fed, BoE, BoJ) from around the world reveal their rate decisions.

This month’s ECB meeting there are little chance of any changes to the communication and policy stance. Euro could show some volatility and positioning before German Election, scheduled on September 26. In Germany polls show the SPD will probably lead a coalition.

Fed will almost certainly be hesitant to announce a taper this month after recent statement and economic data. With quantitative easing about to reverse, it’s more than obvious that the $120 billion-a-month Federal Reserve deluge will probably end sometime in 2022 given inflation at greater than 2% and economic growth prospects remaining optimistic

USDINR

Technical Observations:

USDINR near month futures forming “Diamond Pattern” on Weekly chart. The breakdown of the pattern confirms below 73 which could open further downside. The pattern targets come around 70 odd levels with time horizons around a year.

The pair has been trading well below short and medium term moving averages indicating bearishness.

Momentum oscillator, Relative Strength Index of 14 weeks period trading pierced below 50 and heading south suggesting weaker momentum.

USDINR Sep. future has strong support around 73 and breaking of the same will open downside for 72.70 and 72.30. The trend remains down until it stays below 74.10.

USDINR September Futures Daily Chart

EURINR

Technical Observations:

EURINR near month futures formed hammer pattern on weekly chart which is signaling short term reversal. However, the confirmation of the same will come only above 87.15.

The pair is having resistance around 88.50, the 200 days simple moving average and support in vicinity of 85.30 level (23.6% Fibonacci retracement adjoining 90.81 and 68.21 on monthly chart).

Momentum oscillator, RSI on weekly chart placed at 42 and flattening indicating there could be consolidation before clear directional trend.

EURINR September futures expected to witness short covering bounce up to 88.50 in coming days before heading towards 85.30

EURINR September Futures Daily Chart

GBPINR

Technical Observations:

GBPINR near month futures formed hammer suggesting short term reversal. The pair is holding higher highs and lows on weekly chart indicating medium term up trend.

On weaker side, we can see the pair has broken the short term moving averages support and momentum oscillators are also weaken on daily and weekly chart.

However, there is ray of hope as we can see from side chart there is strong support around 99.30, till it holds one can stay bullish in medium to long term. On higher side we see resistance at 102.30 and 103.45.

Bias for GBPINR September futures remains bullish as it has been treading in rising channel and view will change on breaking of 99.30 level.

GBPINR September Futures Daily Chart

JPYINR

Technical Observations:

JPYINR near month futures has been forming Descending triangle on weekly chart with support line around 66 and downward falling trend line resistance at 68 levels.

The pair has been trading below short term moving averages with lower highs and multiple bottom support around 66

Momentum oscillator, RSI on weekly chart placed around 40 and sliding towards oversold zone indicating weaker momentum.

ADX line is placed at 14 indicating weaker trend on weekly chart.

JPYINR September futures expected show sharp sell-off only below 66 while on higher side up trend can be seen only above 68.

JPYINR September Future Weekly Chart

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