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Rupee hits three month low on risk-off sentiments - HDFC Securities

Indian rupee expected to open slightly higher following overnight pullback in dollar index. The ICE Dollar Index meanwhile is climbing again despite lower yields, climbing --with an air of haven bids -- toward the March high around 93. A global stocks selloff is set to continue in Asia as the spread of the delta coronavirus variant stokes concerns about the resilience of the economic recovery and bolsters haven assets.

Rupee depreciated with its emerging-Asian peers as concern over a virus resurgence around the world sapped demand for risk assets. On Monday, USDINR rose 0.42% to 74.875, its biggest one-day gain in a month and touched the three month high.

Technically, spot USDINR is having psychological resistance at 75 and sustainable trade above this would open for 75.50 while 74.50 becomes the near term support level. The number of Covid cases in the U.K. and U.S. have increased significantly, taking the dollar index higher amid risk-aversion sentiment. That red flag was too large for stock jockeys to ignore, as the S&P 500 sank by 1.6% for its worst day in two months, trimming the year-todate advance to 13.4%.

The recent rates rally kicked into fifth gear today, as the 10- and 30-year Treasury yields each plunged by 12 basis points to their lowest since February at 1.19% and 1.81%, respectively. Low yields once again signaled concerns about economic vulnerability.

Elsewhere, WTI crude was hammered by 7% to finish near $66.5 a barrel, and gold edged lower to $1,812 an ounce. President Joe Biden said he believes the surge in U.S. inflation is temporary and that he has told Federal Reserve Chairman Jerome Powell that he respects the central bank’s independence.

Technical Observations:

USDINR July futures formed higher high after gap up opening indicating continuation of upward trend.

The pair is about to give bullish box breakout above 75.10 the target of the same will be 75.70.

Momentum oscillators and indicators heading higher with volume strength indicating continuation of positive momentum.

USDINR July futures has resistance at 75.10 and support at 74.70.

We could see range bound and profit booking in today’s session but the medium term trend remains up till it holds 74.50.

USDINR July Daily Chart

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