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Rupee likely to open higher as greenback weaken - HDFC Securities

Indian rupee expected to open tad higher following overnight weakness in dollar index. The dollar erased gains against its Group-of-10 peers as risk appetite for stocks and some commodities improved ahead of the Federal Reserve’s Jackson Hole policy symposium beginning Thursday. The Japanese yen was the biggest loser as U.S. yields climbed.

The forward markets indicate USDINR could open 12-15 paise lower from previous close. On Wednesday, spot USDINR gained 5 paise to 74.24, back the two days losing streak. Technically, the pair has been trading with bearish sequence of lower top lower bottom on daily chart and has support around 74 and resistance at 74.50.

Asian stocks are set for a mixed start as traders await more clues about the regulatory outlook in China as well as the Federal Reserve’s approach to paring stimulus.

Indian shorter-maturity bonds gain as central bank Governor Shaktikanta Das reiterated the authority’s stance on continuing with its accommodative policy to support economic growth. 5-year yield drops 1bp to 5.69%; 4-year yield also down 2bps to 5.31%. The 10-year yields down 1bp at 6.24%; rose to 6.265%, the highest since March; yields surged 3bps in the previous three trading sessions and are up ~20bps since end-March amid rising expectations of policy normalization by the RBI. The central bank to conduct Open Market Purchase of 250b rupees of debt as part of its 2nd government securities acquisition program today.

US 10-year Treasury yield climbed nearly to 1.35%, the highest in almost two weeks, after U.S. President Joe Biden received a classified report on the origins of the coronavirus. U.S. intelligence report on the origins of Covid-19 is inconclusive and does not rule out the possibility of a lab leak — a conclusion that could further stoke tensions between Washington and Beijing.

USDINR

Technical Observations:

USDINR August futures has been trading near lower band of the Bollinger band indicating continuation of weak trend.

The pair has been forming lower top lower bottom formation.

Momentum oscillator, relative strength index of 14 days period has been placed below 50 with downward momentum indicating weakness.

Options data of USDINR August futures has maximum pain at 74.50 while high addition in 74 Put could act as strong support. The expiry could be in the range of 74.10 to 74.50, as per the option distribution data.

USDINR August futures expected to trade with negative bias and level around 74.45 attracts fresh short selling with downside support at 74.10 and 73.80.

USDINR August Daily Chart

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