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Rupee gains for the first week in six on dollar inflows from IPOs - HDFC Securities

Indian rupee marked first weekly gains after falling for the six weeks in row as dollar inflows from 2 IPOs were seen. This week also begin with Zomato IPO which may add more flows in the systems after last week oversubscription of two IPOs.

Indian ride-hailing startup Ola plans to raise $500 million from investors including Temasek and an affiliate of Warburg Pincus ahead of a planned IPO. In short, the dollar inflows will continue to pour and that will support the rupee this month. Spot USDINR ended the week with loss of 11 paise to 74.64 after touching 74.88 on July 2.

Technically the bias for USDINR remains neutral with the range shifting upward to 74.00 to 74.80. India’s foreign exchange reserves rose by $1.013 billion to $610.012 billion from $608.999 billion reported for the week ended June 25, RBI data showed. It was a volatile holiday-shortened week as everything from oil to bonds to stocks swung.

Nothing fundamentally changed from day-to-day and OPEC+ remained in limbo, but the S&P 500 and Nasdaq still ended at records. Looking under the hood, the pace is slowing, as the S&P gained 1.1% over the four sessions, down from a 1.7% rise last week and a 2.7% gain the week prior. US Treasuries snapped an eight-day rally as the focus turned toward $120 billion in coupon supply set for Monday and Tuesday.

An uncertain future for the U.S. dollar is adding to growing unease among money managers when it comes to making firm calls on emerging-market assets. One-month risk reversals for the Dollar Spot Index are falling again after gradually advancing from April lows. The gauge reflects demand for greenback exposure and is signaling more downside risks.

The People’s Bank of China cut RRR by 50 bps on Friday, unleashing about 1t yuan ($154b) of longterm liquidity into the economy. After the yuan reached a 2021 high near 6.35 on May 31, Chinese policymakers took action on June 1 to reduce the supply of USD and other foreign currencies onshore. The Chinese currency has lost ~1.7% since then, less than the 2.7% advance in the dollar index.

USDINR

Technical Observations:

USDINR July futures has been consolidating in the range of 74.40 to 75.10.

The pair is having support at 74.40, the 21 Days simple moving average.

Momentum oscillator, Relative strength index of 14 days period, given negative divergence and exited from the overbought zone indicating near term weakness in the pair.

Momentum indicator ADX is flatten near center line indicating weak up trend.

USDINR July futures expected to trade in the range of 74.25 to 75.10 range in coming days with bias remaining on downside following weakness on oscillators.

EURINR

Technical Observations:

EURINR July futures has downward slopping trend line resistance at 88.90, adjoining the high of 91.02 and 89.86.

The pair has retraced 50% Fibonacci level to 88 and now swinging around short term moving averages.

The gap between –DI and +DI has been narrowed in last couple days while ADX line flatten below breakeven line indicating weaker down trend.

Momentum oscillator, RSI of 14 days period also hovering around 50 and heading towards north.

EURINR July futures expected to trade higher once the level of 88.90 crosses while on down side 88 remains strong support and 89.86 becomes the resistance.

GBPINR

Technical Observations:

GBPINR July futures has been trading in the broad range of 104.24 to 102.36 since mid April, after surging from the level of 99.42 to 105.15 in March.

The pair has been hovering around short term moving average suggesting near term consolidation.

The pair has been trying to hold the support of 50% Fibonacci retracement level adjoining 99.42 and 105.15.

Momentum oscillators and indicators are also flatten and not giving clear momentum with trend direction.

Short term traders should wait for the range breakout from 104.24 to 102.36 for clear directional movements.

JPYINR

Technical Observations:

JPYINR July futures has been trading with higher top higher bottom after finding support around 66.20.

The pair has retraced 38.2% of the fall from 69.84 to 66.20.

It has also completed the 100% extension from 66.20 to 67.77. Looking at the patterns, the pair could head towards 69-69.25 level in coming days as it has been holding well above short term moving averages.

Momentum oscillator, RSI also placed above 50 and direction is toward north.

Technical bias for JPYINR July futures remains bullish with higher side target of 69.25 while on down side it has support at 67.35, the 21 days exponential moving average.

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