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Rupee closes below psychological level of 75

* Indian rupee expected to open slightly lower but with rebound global equities and US futures, we might see short covering and unwinding of positions. Trading positions and volumes could remain light ahead of big event of Union budgets, scheduled on Tuesday.

* Spot USDINR rises 0.4% to 75.0688 earlier it had touched 75.3087, highest since Dec. 23. Sentiments remained upbeat for dollar after Federal reserves walk on the talk with policy normalisation and hinted rate hike in March policy meet. Most of the Asian currencies traded lower versus the dollar and to rally once the market completes its reassessment of the Fed’s monetary policy outlook.

* Spot USDINR has closed above psychological level of 75 indicating further upside from here on. Technically, the pair has given bullish head and shoulder pattern breakout with target of the same comes around 75.70.

* India’s government bonds and the rupee slid as traders factored in an increasingly hawkish tilt by the U.S. Federal Reserve to combat inflation. India 10-year yields jumped 6 bps to 6.72%, highest since December 2019.

* A gauge of dollar strength rose to a five-week high amid a flatter Treasury yield curve and falling U.S. share prices as solid U.S. growth figures for Q4 reinforced expectations of tighter Fed policy. ICE dollar index climbed to its highest level since July 2020.

* Euro fell to 1.1132, its lowest level since June 2020, after stops are tripped below the Nov. 24 low of 1.1186. The drop comes amid Swiss franc weakness and dovish comments by ECB policy members Rehn and Kazimir on inflation.

* Ukraine tensions appeared to soften after President Volodymyr Zelenskiy said the Normandy advisors meeting was positive.

USDINR January Daily Chart

Technical Observations:

* USDINR February futures closed well above 55 Days exponential moving average.

* The pair also retrace 50% Fibonacci level adjoining recent swing high of 76.90 to low 74.10.

* The pair has given neckline breakout of head and shoulder pattern on hourly chart. The target of the same come around 75.75 odd level. That is coincidentally come around 61.8% Fibonacci retracement.

* Momentum oscillators and indicators turned positive on daily chart indicating bullishness.

* USDINR February futures expected to trade higher with resistance at 75.50 and 75.80 while the support has been seen at 75.15.

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