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Greenback Continues To Surprise Bears With Its Resilience - HDFC Securities 

In the week gone, the dollar rose against all of its Group-of-10 peers as U.S. Treasury yields climbed, while most other Asian currencies traded in tight range with positive bias. Indian rupee gained 27 paise to 74.15 a dollar, remained right through the all five days following strong foreign fund inflows and risk on sentiments.

Going ahead, we could see cool down in dollar inflows while strength in dollar index after recent US economic data. India’s forex reserves increased to record high of $620.576 billion from $611.149 billion reported for the week ended 23 July. Spot USDINR is expected to see some short covering bounce in coming days following rebound in dollar index and stabilization of foreign fund inflows. Technically, the pair is having support at 73.90 and resistance at 74.65.

In line with expectations, the RBI left key policy rates unchanged at its monetary policy review in Aug-21, while reiterating its accommodative stance.FY22 forecast for CPI inflation was upped by 60 bps to 5.7%. Its decision to suck out some more of the excess liquidity was also largely in line with expectations. But what has got the market worried that the accommodative stance this time had a dissent vote.

On Friday, the dollar strengthened, stocks set another record and Treasury yields leaped after U.S. payroll figures beat expectations with the biggest increase on almost a year, fueling speculation that the Federal Reserve is moving closer to announcing when it will start tapering asset purchases.

The report marked another example of the labor market making the “substantial” further progress that the Fed wants to see. Markets are now feeling more comfortable with the Fed’s rate expectations priced into the dollar. There is still a bit further to go before the conditions will be in place for a taper, so Jackson Hole/September still look premature.

In the week ahead, market that has received confirmation from Clarida and NFP about its tapering expectations may not be too impacted by another high US CPI read, but may stay concerned about the Covid wave in Asia.

USDINR

Technical Observations:

USDINR August futures formed Doji candle on daily chart indicating indecisiveness among traders.

The pair ended below 50 days simple moving average. It has gap support in the range of 74.10 to 73.95.

Momentum oscillator, relative strength index of 14 days period headed towards oversold zone suggesting weaker trend.

MACD placed below zero line with negative divergence. USDINR August futures has 74 support and resistance at 74.80.

The pair likely to show some short covering bounce while medium term bias remains bearish until it closes above 74.80.

USDINR August Futures Daily Chart

EURINR

Technical Observations:

EURINR August futures ended below previous bottom and continued with lower top lower bottom formation on daily and weekly chart.

The pair has been trading in downward slopping channel with downside support at 87 and resistance at 88.75.

Momentum oscillator, relative strength index of 14 days period entered in oversold suggesting continuation of negative momentum.

Moving Average Convergence and Divergence (MACD) drifted south and placed below zero line suggesting negative trend.

The bias for EURINR August futures remains bearish with downside support at 87 and resistance at 88.75.

EURINR August Futures Daily Chart

GBPINR

Technical Observations:

GBPINR August futures closed at 50 days simple moving average support.

The pair has formed higher highs but yet to form higher low on daily chart. Momentum oscillator, relative strength index of 14 days period hovering below 50 but direction is slightly on upward side.

MACD still placed below zero line but with positive cross over indicating rebound in the trend.

GBPINR August futures has support at 103.05 and resistance at 104.26. Near term bias for GBPINR August futures remain neutral to bullish till it holds the support of 103.05

GBPINR August Futures Daily Chart

JPYINR

Technical Observations:

JPYINR August futures closed at 50 days simple moving average support but started forming lower top lower bottom on daily chart indicating bearishness.

The pair is in formation of bearish head and shoulder pattern with neckline support at 67.50. On breaking of neckline support, we could see level of 66.22, the pattern target.

Momentum oscillator, relative strength index of 14 days period heading southward.

Trend indicator MACD also given negative cross over and about to fell below zero line indicating bearish trend.

JPYINR August futures expected to show weakness below 67.50 while any level above 68.30 will negate the said view

JPYINR August Futures Daily Chart

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