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Rupee likely to open lower on risk-averse moods

Indian rupee likely to join the regional currencies with opening lower following strength in dollar index after FOMC minutes. ICE’s Dollar Index is already buoyant, reaching a 3-month high. Regional stocks are set for a steady open after the S&P 500 and Nasdaq Composite each closed at all-time highs.

On Wednesday, spot USDINR closed at 74.62 gaining 7 paise following risk-off sentiments and higher crude oil and dollar index. The pair likely to trade with positive bias following stronger dollar index. It has resistance at 74.80 followed by 75.10 while continue to get support at 74.10 and 73.70.

Asian currencies may face more downside pressure in the short term under the weight of the Fed’s hawkish shift and the worsening pandemic in the region. Most Asian currencies weakened over the past month. The downward journey seems to have more to run -- especially after China’s signal of a RRR cut, which could lead to more policy divergence compared with the U.S. The yield on 10-year U.S. Treasuries was at 1.32%; fell below 1.3% for the first time in over four months as the reflation trade faltered. EUR/USD fell 0.25% to 1.1787; touched 1.1782, lowest level since April 5.

Interest in short-dated euro options rises ahead of release of ECB strategy review Thursday. Minutes released Wednesday of their June 15-16 Federal Open Market Committee meeting revealed lingering questions about how long labor shortages and supply bottlenecks contributing to inflation would last. Meanwhile, central banks have become the market’s biggest whales, having spent $9 trillion since the start of the pandemic.

Technical Observations:

* USDINR July futures formed Doji candlestick with bigger upper shadow, indicating weaker bulls.

* However, the pair is still holding well above short term moving averages with higher top higher bottom formation.

* Momentum oscillators and indicators are heading higher indicating continuation of upward momentum.

* USDINR July futures has support at 74.30 and resistance at 75.10.

* Near term bias remains bullish until it holds the level of 74.50.

USDINR July Daily Chart

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