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Rupee Outlook and Strategy

• The US dollar rebounded and closed above the 102 mark on a thin trading day as US markets were closed on Monday. The broader trend seems to be weaker as expectations of a smaller size rate hike in the coming policy meeting has improved following a decline in inflation numbers. Now the major focus shifts towards BoJ’s policy, which is due on Wednesday

• Rupee future maturing on January 27 depreciated by 0.22% to settle at 81.64 on Monday amid continuous foreign fund outflows and recovery in the dollar index

• The rupee is likely to remain in an appreciation mode following weakness in the dollar amid hopes of a less hawkish Fed and rise in global risk appetite. US$INR is likely to face resistance near 81.80, followed by 82.00 and decline towards the initial supports at 81.30 and 81.10. At the upper end, the 50 day EMA at 82 would act as key resistance for the pair

Euro and Pound Outlook

• The Euro gave away some of its gains but settled above the key support zone of 1.08 amid hopes of less aggressive rate hike by Fed and rally in risky assets. Meanwhile German WPI marked a decline of 1.6%. Softer number could support continued cooling in German inflation numbers

• The Euro is expected to trade with a positive bias amid expectation of strong economic numbers. The Zew Economic Sentiment is expected to improve for a fourth consecutive month in January. On the technical front, 1.08 holds key support to the trend. As long as the pair holds above 1.08 it is likely to rise towards 1.09, followed by 1.098 level. EURINR (January) is expected to march towards 89.00-89.20 zone as long as it trades above the key support of 87.80

• The pound also erased its gains on Monday following a rebound in the US dollar index and dovish remarks from BoE Chair Bailey. He said inflation looks set to fall markedly this year as energy prices decline. The dovish comments have increased the hopes of slower pace of rate hike in the UK region, which has restricted the pair to go beyond the 1.23 mark

• The pound is expected to trade in the range of 1.2130-1.2280 with a positive bias as it continues to trade above the 200 day EMA at 1.2110. Moreover expectation of rise in average weekly earnings may help the pair to remain firmer. Further more expectation of a decline in unemployment claim could also support the pair. GBPINR (January) is likely to rise towards 100.10, followed by 100.40 as long as it holds above the key support of 99.00

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