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Rupee Bulls Are Back After Holiday

• India’s onshore FX trading will resume Wednesday after a public holiday. The domestic forex market remained closed on Monday and Tuesday because of Independence day and Parsi new year. Spot USDINR could open 50 paise lower taking cues from the forward markets.

• Indian rupee to open with up-gap to follow up last two days rally regional currencies, risk assets and lower crude oil prices. Some of the positive factors which are likely to support the rupee are:

* Sliding oil prices could help improve India’s external balance while bringing inflation under control.

* In addition, foreign investors have turned into net buyers of India’s financial assets, recently. They purchased a net 2.65bn and $277mn of local shares and bonds respectively on August 1-11, after reducing holdings by $27.72bn and $2.25bn respectively in the first seven months of 2022.

* RBI is expected to continue to defend the INR amid ongoing external uncertainty, capping upside room for USD/INR.

* Russia is considering purchases of China’s yuan, India’s rupee and Turkey’s lira for its wealth fund under a budget mechanism that uses excess income from energy sales.

* On Friday, we have seen the pair briefly recover all losses to close with a 2 paise gain to 79.66. Technically, the pair is having resistance around 79.95 and support at 79.20.

* According to the data released earlier, India’s CPI inflation eased to 6.71% YoY in July from 7.01% YoY in June, below the market estimate of 6.75%. Meanwhile, the country’s WPI inflation declined to 13.93% YoY in July from 15.18% YoY the previous month, compared to market expectations of 13.70%.

* The greenback was mixed against its Group-of-10 peers, with the Japanese yen and the Swiss franc as the biggest decliners for the session.

USDINR

Technical Observations:

* USDINR August futures has been facing stiff resistance at the middle band of the Bollinger band.

* The pair is having upward slopping trend line support near 79. • The pair is meandering around 13 days exponential moving average for the last six days.

* Relative Strength Index of 14 days oscillating around 50 indicating consolidation in the near term.

* MACD is placed above zero line but the direction remained down following negative cross-over and histogram bars.

* Long unwinding has been seen with a decline in the price and the open interest along with volatility. • USDINR August futures could consolidate in the range of 79.30 to 79.90.

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