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USDINR needs a stronger catalyst to boost as rally looks threadbare

Rupee drifted lower for the fourth week in row following higher crude oil prices and foreign fund outflows in the week gone. Even after weakness in dollar index, rupee depreciated 54 paise to 74.19 a dollar in the week gone. Foreigners have sold worth $359 billion equities and $381 billion debt markets. Technically, spot USDINR could show retracement up to 73.70 before heading higher towards 74.80.

India’s forex reserves declined from life high by $4.148 billion to reach $603.933 billion for the week ended 18 June due to fall in value of gold and reserve currency assets.

Risk sentiments rebounded with major benchmark recovered from a Federal Reserve-induced swoon previous week. The S&P 500 closed the week at another record high, rallying to post the best weekly performance since February, albeit the shallow breadth of the rally may be a warning signal. The long climb higher means the air is starting to get thin. The weakening argument for hawkishness may add more fuel to riskier assets and provide support for higher beta currencies.

The dollar’s rally continues to unravel after the Federal Reserve’s hawkish pivot last week. The inflation surprise to the downside Friday, along with soft personal-spending data, give credence to the view that a hike is still a long way off. The dollar index basket of six currencies, ended the week with loss of 0.41% to 91.851. The hottest reading of the core personal consumption expenditures index in nearly 30 years (a 3.4% annual increase for May) spurred some bearish action in dollar index in the week gone.

Brent crude continued its bull rampage with a push above $76 a barrel and marked fifth weekly gains. This week’s OPEC+ meeting could be a stumbling point as members discuss production policy in the light of a tighter post-pandemic market.

CFTC: In FX, it should come as little surprise that there was good buying of dollars. The biggest flows were in the euro (sales of 29k), sterling (14k), and yen (7k). Specs actually bought Swiss franc to the tune of 4k. The aggregate dollar short fell by $5 billion.

USDINR

USDINR July futures closed above 50 days simple moving average.

The pair has been forming higher top higher bottom formation on daily and hourly chart.

Recent gains in pair was well supported with volumes suggesting bullishness.

Momentum oscillator, relative strength index of 14 days period heading north suggesting strengthening of the trend.

ADX line also placed above 25 and +DI is placed above –DI indicating continuation of positivity.

USDINR July futures has strong support around 73.80 and resistance in the range of 74.80 to 75.

EURINR

EURINR July futures has been trading in downward slopping channel adjoining high of 91.77, 90.26 and low of 89.75,89.02. It has channel resistance around 89.25 and support around 88.

Formation of lower top lower bottom on daily chart indicating bearishness.

The pair has 76.8% Fibonacci retracement adjoining high 91.77 and 86.80 at 87.95.

The pair has witness short covering bounce last week following weaker rupee.

The down trend will get negated only above 89.30 while fall below 88.37 could drag EURINR July futures toward gap support in the range of 87.50 to 87.20.

GBPINR

GBPINR July futures facing stiff resistance at 50 days simple moving average at 104.17.

The pair has been forming lower top lower bottom on major time frames indicating continuation of down trend.

Momentum oscillator, relative strength index of 14 days period placed sub 50 level indicating weak trend.

Momentum indicators on daily and weekly chart also supporting down trend.

GBPINR July future expected to trade with negative bias until it crosses the level of 104.20 while on down side we see support at 103.30 and 102.70.

JPYINR

JPYINR July futures has been in consolidation mode after last month sharp sell-off

The pair has resistance at 68 level, June months high

The pair has been swinging around 21 DEMA.

Momentum oscillator, relative strength index of 14 days hovering below 50 indicating weakness.

Flattening of +DI and –DI along with weaker ADX line indicating weakness.

We remain neutral in JPYINR July futures at this juncture and wait for clear direction. From the level front 68 remains bigger hurdle to change the trend while on down fall below 66.50 will confirm the double bottom breakdown.

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