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Relief for Battered Asian Currencies as Dollar Retreats - HDFC Securities 

• The Dollar Spot Index is running ~2% below its May peak, heading for its first weekly loss since the start of April. The dollar extended its decline, staging the largest intraday drop since November 2020. The signals are getting clearer that a near-term dollar peak is forming and that will be a relief for battered Asian equities and currencies. Stocks and US equity futures pushed higher Friday as sentiment received a boost from a move by Chinese banks to lower a key interest rate for long-term loans by a record amount.

• China has lowered the 5-year LPR by 15 bps, while leaving the 1-year rate unchanged. That may be a bit less than traders hoped for but it is still lifting the Hang Seng index and S&P 500 futures. China equities may also enjoy the news, along with a report on Shanghai banks allowing some workers to return.

• The forward markets indicate USDINR could open lower by 18 paise at domestic bourses. On Thursday, spot USDINR gained 15 paise to 77.73. The pair is expected to trade left as risk recovers and the dollar falls. It has support at 77.30 and resistance at 77.95.

• Asian equities will be hoping the overnight advance for the Nasdaq Golden Dragon China index has more influence on sentiment than another decline for US stocks. Meanwhile, the dollar slipped and yields fell across the Treasuries curve as the recession narrative gathersstrength.

• Crude oil will be in focus following news that China is in talks with Russia to help replenish itsstrategic reserves.

USDINR

Technical Observations:

• USDINR May futures formed another Doji candlestick pattern indicating indecisiveness.

• The pair has been trading in a rising channel with resistance around 78.30, and support at 75.50.

• It has support at 77.30, the 13 days exponential moving average.

• Relative Strength Index of 14 days period hovering around the oversold zone of 70 and currently placed at 68.4.

• +DI is placed above –DI upward and ADX line flattening indicating a positive trend.

• USDINR May futures is expected to trade lower with support at 77.30 and resistance at 77.90. However, the medium-term trend remains upward as long as the pairtrade above 76.95.

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