IGI Logo

Dollar To Bid-well Until Inflations Peak Out

* The week gone by was full of drama in the financial markets. A shock US inflation print sent stocks and bonds tumbling and then turning positive on Thursday only to have them jerk back in one of the most extreme days of trading since the Fed intervention of March 2020. The rebound was all the more surprising as it came out of the blue and seems to have been triggered by positioning rather than fundamentals.

* The Japanese currency tested its weakest level since the Asian crisis after the inflation data, only to rebound. While there were fireworks in the Japanese currency market, UK Prime Minister Liz Truss may have been disappointed with sterling’sreaction to her dismissal of Kwasi Kwarteng, a close friend and ally.

* Back home, the rupee remained relatively calmer after touching a record low on Monday. The central bank’s intervention, corporate dollar inflows and lower crude oil prices all support the rupee even after a stronger dollar index. Spot USDINR gained mere 3 paise to 82.36, clocking the fifth consecutive weekly gain in a row.

* USDINR Outlook: Fundamental and technical set-up remains bullish for USDINR amid higher top higher bottom formation. The pair is having near-term resistance at 82.90 and support at 81.95.

* The dollar index is likely to keep rallying until the current slowdown in the global economy is over, inflation peaks out and growth starts to accelerate again. Till that happens, the dollar will be the safest place.

* CFTC Positioning: The flow was mixed as the aggregate dollar position was largely unchanged from the prior week. Specs were buyers of yen (4.2k), sterling (10.4k), CHF (1k), and MXN (3.7k) while selling euros (6.2k), CAD (4.3k), AUD (3.5), and NZD (5.1k).

Technical Observations:

* It was a relatively calmer week for USDINR as it has been trading in the narrow range of 82.20 to 82.65. The pair has support at 81.55, the middle band of the Bollinger Band.

* Momentum oscillator, Relative Strength Index of 14 days turned flat with lacklustre price action.

* Short build-up has been seen with a fall in price and a rise in open interest and volume (Reference table on page 7).

* The view remains bullish for USDINR Oct. futures with the higher side resistance at 82.90 and support at 81.50.

USDINR Oct. Futures Daily Chart

Technical Observations:

* Previous week’s rally was short-lived in the EURINR as it erased most of the gains this week. However, it has managed to close above the shortterm moving average. Hope for the bull remains alive as it is far from the previousswing low.

* Relative Strength Index of 14 days is oscillating above 50 which is considered as positive momentum for the pair.

* Long unwinding has been seen with the fall in price and open interest. (Reference table on page 7).

* We remain neutral and wait for a higher low for trend reversal. In the near term, the pair hassupport at 78.10 and resistance at 81.53.

EURINR Oct. Futures Daily Chart

Technical Observations:

* GBPINROct. fut. resisted at 93.50, the upper band of the Bollinger Band.

* The pair started forming a bullish sequence of the higher top higher bottom on the daily chart.

* Momentum oscillator, Relative Strength Index of 14 days placed at 55 and heading north supporting the positive momentum.

* The short-term view for the pair turns bullish above 93.50. The breakout above 93.50 will push the pair towards 95.20 levels while breaching the recentswing low of 90.20 will negate the bullish view.

GBPINR Oct. Futures Daily Chart

Technical Observations:

* JPYINR Oct. fut. headed to a multi-year low. It has broken the support of short-termmoving averages.

* Relative Strength Index of 14 days weakened and heading towards south indicating bearish momentum.

* MACD also turned bearish with a negative cross-over and reversed before crossing the zero line.

* The pair is having support at 55.20 and resistance at 57.50.

* We expect JPYINR to break the recent swing low and head towards 54.50 odd levels.

JPYINR Oct. Futures Daily Chart

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.hdfcsec.com/article/disclaimer-1795

SEBI Registration number is INZ000171337

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer