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Rupee Outlook and Strategy

• US dollar index on Tuesday fell by 0.09% and settled near the 101.92 mark following the decline in the US 10 year bond yields and weaker economic numbers. Manufacturing and Services PMI data showed activity in both sector contracted, signalling a slowdown in the US economy. Furthermore, Richmond manufacturing index slid to a two and half year low of -11 in January

• Rupee future maturing on January 27 depreciated by 0.35% to end at 81.67 on Tuesday amid muted domestic markets

• The US$INR pair is likely to face rejection near 81.80-82.00 zone and is expected to slide towards 81.30 following improvement in global risk appetite and weakness in the dollar. Further expectation of weaker US advance GDP numbers, which is due on Thursday could restrict the recovery in dollar. The pair is still hovering below the 20 day EMA, which could act as key resistance. As long as it remains below 81.80 the pair is likely to move towards the immediate support at 81.30

Euro and Pound Outlook

• The Euro gained against the dollar and settled closed to the 1.09 mark on Tuesday following supportive eurozone economic numbers and weakness in the dollar. The eurozone manufacturing numbers rose to its five-month high of 48.8 against previous reading of 47.80. Also, the uptick in service PMI numbers, which improved above the 50 mark for the first time in the last four reading has supported the Euro to stay firm

• The Euro is expected to rise towards 1.0925-1.0940 mark as long as it holds above 1.083 amid soft dollar and optimistic global market sentiments. Further, expectation of improvement in the German ifo Business climate numbers, which is projected to rise above the 90 mark could also support the single currency. EURINR (January) is expected to rise towards 89.20 as long as the pair remains above 88.40

• The pound erased all its gains and ended with a loss of 0.34% on Tuesday amid weaker set of economic numbers. The service PMI declined to 48 against the forecast of 49.60. Moreover, CBI Industrial order expectation slide to -17 the lowest in the last five months. The manufacturing PMI numbers again failed to make any impression as it remained under the 47 mark for the fourth time in a row

• The pound is likely to remain in a corrective phase following yesterday’s weaker set of economic numbers. At present, 1.245 holds key resistance to the pair. As long as it remains below 1.245, it is likely to move towards the 1.2250 mark. GBPINR (January) is expected to move towards 100.00, as long as it stays below the key resistance of 101.30

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