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Dollar gains without support of data

Indian rupee witnessed short covering rally after gaining for five-weeks in row following rebound in dollar index and unwinding of carry trade as forward premiums declined. Forex markets remained calm after central bank’s hold interest and stance as per the expectation while inclusion of state bond in GSAP-2 disappointed bond traders. Looking at the short term picture, rupee may continue to take cues from dollar index and foreign fund flows. On Friday, the dollar index has taken a leg lower after the US economic headline print failed to spark the imagination of real rates and inflation expectations. The impact of the same has been yet to seen on domestic rupee.

In the week gone, spot USDINR fell 0.80% or 56 paise to 73 level, recovered after fell for the five weeks in row mainly on back of stronger dollar, higher crude oil prices and weaker economic data. As the virus cases started declining, the economic could see some rebound from second half of the month with ease in restriction and lockdown. The series of IPO and risk on sentiments could attract foreign fund inflows which in support the rupee.

Spot USDINR continues to resist around 73.30, the 100 days simple moving average while expected to hold the support in the range of 72.77 to 72.25. Short term bias for the pair remains bearish following weaker broad based dollar index and foreign fund inflows.

India’s foreign exchange reserves rose by $ 5.271 billion to $598.165 billion touched a record high, from $592.894 billion reported for the week ended May 21, as per the RBI’s weekly statistics.

CFTC Data: The flows were also pretty mixed in the week gone with traders bought euros (5.3k), yen (3k), CAD (4k) and CHF (1.5k), while sold sterling (6.5k), Aussie (1.1k) and kiwi (2.7k). The aggregate dollar short increased by about $700 million.

Friday’s below estimates US May employment numbers stand to set the tone for the weeks ahead. Dollar likely to trade left next week, when May inflation numbers in the US may come in at 4.8% and further dampen the dollar real rate. Central bankers will take center stage in the rest of G10 with ECB will struggle to sound any more dovish amid rising tapering speculation.

USDINR

USDINR June futures formed “Doji candlestick” pattern on daily chart near resistance of 21 DEMA.

The pair unable to cross the resistance of 100 DMA.

Momentum oscillator, RSI has been turned weak after reaching 50 levels.

Momentum indicator, DMI also remained weak after last week’s gains.

The above technical evidence suggesting recent surge in the pair was on back of short covering after recent down fall.

USDINR June futures expected to remain under pressure until it cross the level of 73.70 while on downside we could see 72.60 act as strong support.

EURINR

EURINR June futures closed at 100 days simple moving average support. However, the pair is broadly trading in the range of 88.50 to 90 since last one month, lacking the clear trend.

Momentum oscillator, RSI of 14 days period placed below 50 level with negative cross over.

Momentum indicator, ADX also flatten and weaken on daily chart.

Looking at the above technical evidences, we remain neutral to bullish in EURINR June future in short term while medium term trend remains bullish.

Swing trading can use the band of 88.50 to 90 for trading by keeping small stop loss above price band.

GBPINR

GBPINR June future has been forming lower high with double bottom support at 102.46.

The pair has formed three Doji candlestick on weekly chart indicating indecisiveness among traders.

The pair has been swinging near short term moving averages indicating near term consolidation. It has been holding support of 100 days simple moving average.

Momentum oscillators and indicators placed above breakeven line indicating consolidation in bullish trend.

GBPINR June futures expected to trade in the range of 104.25 to 102.46 range with bias remaining bullish till it holds the support of 102.46.

JPYINR

JPYINR June futures formed weekly gravestone doji candlestick pattern indicating bearishness.

The pair has been trading well below short term moving averages with short period average placed below medium term period average suggesting continuation of weaker trend.

Momentum oscillator, relative strength index of 14 days placed at 35 odd level and heading southward indicating continuation of down trend.

We remain bearish in JPYINR June futures and once the level of 66 breaches it starts moving toward March low of 66.25. The pair is expected to face resistance at 67.70, 50 days simple moving average

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