IGI Logo

Risk Assets Gets a Boost From Fed Dovish Taper - HDFC Securities 

Rupee is expected to carry bullish momentum in this week also on back of decline in dollar index and strength in risk-assets after Fed remains firm on dovish taper. Indian rupee, which struggled for direction since last two month has given upward breakout on Friday by gaining 54 paise to 73.69 a dollar. Rupee likely add more gains once it crosses level of 73.65, for higher side 73.25 while on lower side 74.10 will challenge the bulls.

India attracted foreign direct investment (FDI) inflows of $22.53 billion during the first three months of the fiscal year starting on April 1, 90% higher than the April-June period last year, as per government release.

So far this month, Foreign Institution Investors have bought worth $478 million equities and $1.54 billion debts.

Foreign exchange reserves of India declined by $2.47 billion to end at $616.895 billion in the week ended August 20, 2021, showed data with Reserve Bank of India (RBI) on Friday.

Fed Chair Jerome Powell’s annual Jackson Hole speech turned out to be uneventful, which emboldened the bulls, as risk assets ripped higher. Powell reiterated the Fed could start tapering its assets purchases this year and rates aren’t changing soon which helped US indices to hit another record high while sparked a waterfall in the dollar and yields. Speculative dollar longs liquidated, prices impacted by option expiries, month end flows and thin liquidity. Overseas, currency markets will likely remain choppy due to thin liquidity ahead of a U.K. long weekend, flows linked to option expiries, and month-end activity.

In FX, there was substantial dollar buying, notably against the euro (33k) and sterling (21k). Specs also sold yen (3.4k) and AUD (6.2k). The aggregate dollar long on the IMM rose by a solid $6.7 billion and is now at its largest level ($9.9 billion) since the pandemic started to bite in March of last year.

USDINR

Technical Observations:

USDINR September futures given negative cross over of 20 and 50 days moving average. It has also given downward breakdown from month old range indicating bearishness

The pair has partially filled start of June month up gap and falling below will lead to open 73.15.

It has been trading with lower top lower bottom formation on daily and weekly chart suggesting downtrend.

Momentum oscillator, Relative Strength Index (RSI) is about to enter in oversold zone indicating escalation of downward momentum.

Moving Average Convergence and Divergence (MACD) is placed below zero line with negative cross over indicating continuation of downward trend.

USDINR September futures expected to trade with negative bias and level below 73.75 will open 73.15 while 74.60 remains resistance this week.

USDINR Futures Daily Chart

EURINR

Technical Observations:

EURINR September futures traded well below short term moving average of 20 days simple moving average with bearish formation of lower top lower bottom on daily and weekly charts.

The pair has been trading in downward or falling channels (as shown in side chart). It has downward channel support around 86.50

Momentum oscillator, relative strength index of 14 days period has been hovering near oversold zone

MACD of 12 days has been drifting lower and placed below zero line suggesting bearish trend.

EURINR September futures expected to show short covering bounce in coming days but the trend remains bearish.

Short term traders should wait for bounce to make fresh sell. The pair is having support around 86.50 and resistance at 88 and 88.40.

EURINR Futures Daily Chart

GBPINR

Technical Observations:

GBPINR September futures started forming lower top lower bottom on daily and weekly chart and broken previous bottom support.

The pair is having gap support in the range of 100.90 to 100.60. One can expect short covering bounce from that range.

Momentum oscillator, relative strength index again turned weak on daily chart and re-enter the oversold zone indicating weakness.

MACD also placed well below zero line with negative cross over suggesting continuation of weaker trend.

Near term bias for the pair remains bearish amid negative technical chart set-up.

GBPINR September futures expected to hold support around 100.05 and face resistance at 102.50.

GBPINR Futures Daily Chart

JPYINR

Technical Observations:

JPYINR September futures broken the support of 67.56, recent bottom and confirmed the lower top lower bottom sequence on daily chart.

The pair is having multiple bottom support around 66.50.

It has broken the medium term moving average support of 50 days.

Momentum oscillator, relative strength index again heading towards south and placed at 38 indicating weaker momentum.

MACD also placed well below zero line with negative cross over suggesting continuation of weaker trend.

JPYINR September futures is having support at 66.50 and resistance at 68.35. Near term outlook for the pair remains bearish and short covering bounce will be used to make fresh selling .

JPYINR 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