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Rupee likely to open higher as fed retains dovish stance - HDFC Securities 

Indian rupee expected to open higher after overnight weakness in dollar index and rebound in risk-on sentiments after Federal reserves retain dovish stance. Federal Reserve maintained its forecast for low rates, easing fears of a hawkish turn after weeks of rising Treasury yields.

The dollar fell to session lows after the Federal Reserve continued to forecast near-zero interest rates at least through 2023 despite upgrading its outlook for the U.S. economy, while Chair Jerome Powell signaled it wasn’t time to think about hikes..

On Wednesday, spot USDINR ended flat to 72.55. Outlook for USDINR remains bearish in a supportive macro environment for carry trades, backed by relatively high real yields and undervaluation on the basis of IMF PPP metrics.

The one month forward USDINR is suggesting 20 paise lower opening. We remain optimistic for rupee and expect to head towards 72 odd levels. Technically, spot USDINR is having crucial support at 72.26 and resistance at 72.86.

The dollar index dropped to its lowest levels in two weeks and last stood at 91.44. The 10- year U.S. Treasuries yield gyrated wildly before settling around 1.648% for now, having hit an 13-month high just before the Fed's announcement. Now the focus shift to pound as Bank of England decision is due later today.

There wont be any rate change and its bond-buying programme but market is pricing slightly more hawkish comment which could weigh on pound. The interest rate probability indicating from a rate cut to around 50bps of hikes over the next three years. Bank of Japan meeting starts Thursday with expectation of changes to JGB purchase operations

Technical Observations:

USDINR March futures resisting at 20 EMA on hourly chart. The formation of lower top lower bottom on all time scale suggesting continuation of down trend.

The pair is having resistance at 72.78 and 72.86, the 20 and 55 EMA on hourly chart. Momentum oscillators and indicators on hourly chart given positive cross-over but the price action lacking suggesting continuation of weaker trend.

Short term traders should remain bearish with any bounce up to 72.93 will be used to make short sell keeping stop loss at 73.00 for target of 72.50.

USDINR March Hourly Chart

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