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Rupee Plunges To Six Week Low On Widening Trade Deficit - HDFC Securities 

India rupee expected to open lower following risk-averse sentiments globally and stronger dollar against major trading currencies.

 Asian stocks look set to fall after tech shares led a U.S. slide amid concern that surging prices for raw materials risk fanning inflation and sapping economic momentum.

Rising U.S. yields, surging crude prices and weaker stocks drove the dollar up on Monday. Along with other Asian peers, rupee also traded lower and plunges to six week low.

Spot USDINR closed at 74.31 with gains of 19 paise or one fourth percentage points. Trend for the pair is turning bullish following broad based dollar strength, higher crude oil prices, widening trade deficit and dollar demand from oil marketing companies. Technically, the pair is having resistance around 74.50 and support at 73.95.

India’s 10-year yields were little changed at 6.25%. Reserve Bank of India said it will hold a 2t rupee 7-day reverse repo operation Tuesday, and traders will closely watch the cutoff after the previous operation resulted in a higher-than-expected yield cutoff.

Stocks were hit hard with the S&P 500 and Nasdaq 100 sinking 1.3% and 2.2%, respectively, to finish at their lowest levels since mid-July and late-June, while Treasury also finished in the red with the 10-year yield rising to 1.48%.

An announced 400,000 barrel-per-day output hike from OPEC beginning in November didn’t prevent WTI crude from jumping to near $78 a barrel for its best finish since 2014

Technical Observations

USDINR October futures has falling trend line resistance around 74.80.

Short term moving averages crossed above medium term moving averages indicating positive trend.

Momentum oscillator, relative strength index of 14 days period heading north indicating bullish momentum.

ADX line also heading higher suggesting bullish trend.

USDINR October futures expected to trade higher and expected to touch 74.75 level while hold support of 74.25.

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