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Indian rupee expected to show relief rally after depreciating -  HDFC Securities

* Indian rupee expected to show relief rally after depreciating for fifth day in row following better than expected economic data and normal monsoon season. The forward markets indicating USDINR opening 3 to 5 paise higher. On Thursday, spot USDINR ended at 73.24 declined 9 paise, up 1.7% in September month, most since June. Technical set up has turned bullish for the pair and crossing of 74.50 confirms the downward slopping trend line breakout while on downside 73.60 remains strong support.

* India’s current account turned in a surplus of $6.5 billion in the three months ended June versus expectation of $2 billion surplus and deficit of $8.1 billion in previous quarter. The latest surplus came on the back of a contraction in the trade deficit to $30.7 billion from $ 41.7 billion in the preceding quarter, and an increase in services receipts.

* India received normal monsoon showers for a third straight year, brightening prospects for bumper harvests of crops such as rice, oilseeds and pulses.

* The dollar fell against most of its Group-of-10 peers as energy prices spiked higher and equities declined. Commodity currencies led the advance, while yen rebounded after dropping for six straight sessions. The yen gains ground amid monthly hedging flows, weakness in share prices and profit-taking.

* US Senate passed a stopgap spending bill aimed at averting a federal government shutdown this Friday and The House is expected to pass the measure and send it to President Joe Biden for signature before the midnight deadline

Technical Observations

* USDINR October futures forming bullish sequence of higher highs and lows on daily chart.

* The pair is having falling trend line resistance around 74.75.

* It closed well above 55 days exponential moving averages

* Momentum oscillator, Relative Strength Index of 14 days headed north and currently placed at 60 suggesting upward momentum in the pair. 

* MACD about to cross the zero line while histogram started forming bigger blocks indicating upward trend. 

* USDINR October futures likely to trade higher with intraday resistance near 74.75 and support at 74.40. 

* Near term bias remains bullish and breakout above 74.75 will confirm medium term trend reversal.

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