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Rupee enjoys late ramp with gain in Equities - HDFC Securities 

Indian rupee expected to open slightly higher following risk-on sentiments and strong foreign fund inflows through IPOs. The focus will remain on today’s RBI policy announcements. On Thursday, rupee closed steady at 74.18 with a paise gain. Technically, local unit expected to stay strong and we could see level of 74 in coming days while any level below 74.60 will negate the bullish views.

Reserve Bank of India has its eye on securing a recovery in the economy, and will probably put up with faster inflation in the near term. It is likely to maintain its accommodative policies at today's review. The repo rate should stay at 4.00% and the reverse repo rate at 3.35%. The RBI is likely to reiterate its state-contingent forward guidance to continue with its accommodative stance for as long as necessary to revive and sustain growth on a durable basis.

The RBI will probably lift its inflation projection for fiscal 2022 to an average 5.5-6% from the 5.1% forecast in June. They may retain its GDP growth forecast of 9.5% for fiscal 2022. Asian stocks look set to follow U.S. equities higher after earnings helped Wall Street to a record close. It was a risk-on day on Wall Street, with the S&P 500 hitting another record and bond yields rising.

The focus is still very much on today’s payrolls, with bonds now flat and equities only up modestly for the week. The consensus is for a gain of 858K jobs, similar to June. The dollar could be where the action is and it has tended to weaken on payrolls day. It fell seven out of the past eight times in the first hour after the data release. The pound held an advance after the Bank of England signaled concerns about inflation.

The Bank of England sounded hawkish, signaling its concerns over inflation are strong enough to warrant the withdrawal of some stimulus. The Japanese yen was the only Group-of-10 currency to weaken against the greenback as the nation reported a record number of new coronavirus cases.

USDINR

Technical Observations:

USDINR August futures closed near low of the Doji candlestick pattern suggesting bearishness.

The pair is also trading well below short term moving averages with lower top lower bottom formation.

It has support around 74.25, the 50% Fibonacci retracement level of previous up swing from 73.20 to 73.35.

Momentum oscillators and indicators are oversold with weaker trend indicating weakness in the pair.

USDINR August futures has support at 74.15 and resistance at 74.55.

USDINR August Daily Chart

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