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Oil Is The Big Story For Forex Markets - HDFC Securities 

Rupee traded lower in the week gone following foreign fund outflow and higher crude oil prices. For rupee, jump in oil prices has come at a time when India’s trade deficit is already running at a high, at $22.9 bn in Sept from $13.9 bn in Aug. Spot USDINR closed at 74.99, a paise away from 75, with gain of 87 paise or 1.17% in the week gone.

Technically, spot USDINR is bullish on daily chart with formation of higher highs and lows along with Triangle pattern breakout. From the level front, the pair has resistance at 75.35 and 75.50 while continue to hold support at 74.65 and 74.30.

India’s forex reserves declined by $1.169 billion to stand at $637.477 billion in the week ended 1 October, the Reserve Bank of India (RBI) data showed.

The energy crunch in Asia and Europe highlighted the tightness across the sector. Crude oil gained amid a broader rally in the energy sector as fears of strong demand and supply shortage continue to grip the market.

The greenback, against a basket of peers, traded largely unchanged for the week, with the DXY continuing to trade above key technical support at the 94 handle. A third straight weekly close above said level would likely further embolden the bulls. For G10 FX, however, the level of yield appears to matter more than the speed at which the bond market is moving, at least at the moment. Japanese Yen turn out the biggest loser in Asia from the advance in U.S. yields. It has fell more than a percentage point to 112.24 level, placed at lowest level since 2018. U.S. Treasury yields climbed as traders held fast to Federal Reserve tapering bets, shrugging off last month’s weak job creation numbers.

CFTC Data: In FX, euro selling continued, with specs lobbing about 23.2k contracts to go short for the first time since last spring. The aggregate dollar long increased by a chunky $7 billion on the week and is now the largest since mid-2019 to $22.9 billions.

Technical Observations

USDINR October futures has been closed above downward slopping trend line resistance placed at 74.70 with higher volumes.

The pair has been placed above long term moving averages and short term moving averages placed above long term moving averages indicating bullish trend.

Momentum oscillator, relative strength index placed in overbought zone.

Direction Movement Index is very placed on daily and weekly chart indicating strength in up trend.

Looking at the above technical evidences, we expect USDINR October futures could show profit booking while holding medium term trend up.

From the level perspective, USDINR October futures has resistance at 75.50 and support around 74.65. In the event of profit booking, we could see level of 74.65 to 74.35 while higher side 75.50 remains biggest hurdle to cross.

Technical Observations:

EURINR October futures given downward slopping trend line breakout but still has biggest hurdle at 87.50 and 87.76, the medium term trend line resistance and 200 DMA respectively.

The pair manages to closed above 21 DEMA, with volume started improving.

Momentum oscillators, relative strength index of 14 days period heading north with positive cross over and divergence indicating positive momentum.

DMI is also turned bullish with +DI placed above – DI but the trend yet to show strength as ADX line is still weaker with downward directions.

EURINR October futures expected to trade with positive bias but the upside can be capped between 87.50 to 87.80 while on downside also we see 86 acting strong support.

Medium term trend reversal can be confirmed only above 87.80.

Technical Observations:

GBPINR October futures has been oscillating around 200 DMA, as it has been trading with in +/-2% to average. The question remains whether this time pair manages to head higher ! The answer for the same lies with GBPUSD which still trading well below 200 DMA with lower top lower bottom formation.

Momentum oscillator, relative strength index of 14 days period has been heading north and about to enter in the overbought zone. The oscillator also given positive divergence indicating probable reversal in trend.

The pair has formed higher high while yet to make higher low to confirm trend reversal.

The pair has given channel breakout on daily chart and sustaining above 102.45 will open for 103 odd level while on down side 101.30, the 200 DMA remains strong support.

We expect pair to consolidate in the range of 103 to 101 range in coming week.

Technical Observations:

JPYINR October futures manages to close above short term moving average of 21 DEMA.

The pair has downward slopping trend line resistance around 67.50, adjoining high of 69.85, 68.58 and 67.94.

The pair has been holding multiple bottom support around 66.

The pair has been trading down with low volume indicating lack of buying interest.

Momentum oscillator, RSI has been placed below 50 and short term direction is on south side indicating weakness in the pair.

Technical evidences suggest medium term downtrend while weakness in USDJPY could further add pressure on JPYINR.

Medium to long term trend for JPYINR October futures remain bearish while in near term it may expected to trade in the range of 66 to 67.70.

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