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Rupee sees Headwinds from Peers - HDFC Securities 

• The risk-assets mood is fragile enough that a report Shanghai will lock down the Minhang district Saturday morning has helped to trigger the selling of US futures and put a bid under USDCNH. That weighed on other Asian currencies as well, with the rupee opening 10-12 paise lower at domestic bourses.

• On Wednesday, spot USDINR again remained in a tight range even after RBI’s interest rate hike decision. The pair closed with gains of 3 paise to 77.74. Trading activities remained dull since mid-May with lower volatility and volumes. The near-term view remains neutral to bullish and sustainable trade only above 77.95 can give an upward breakout while on the lower side it has strong support around 77.40.

• Stocks slipped in Asia on Thursday and bonds were again on the back foot, weighed down by the impact of high inflation. A climb in oil past $122 a barrel has stoked worries about rising costs and monetary tightening. On Wednesday, US stocks fell after a two-day rally and oil continued its relentless rise, fueling worries about inflation and measures by central banks to contain it.

• The dollar climbed, trading higher than most of its Group-of-10 peers. Japanese Yen weakens for a fourth day as BOJ Governor Haruhiko Kuroda reiterated the need to ease policy to support the economy on Wednesday. USD/JPY rallied as much as 1.4% to 134.47, the highest since February 2002. Dollar Spot Index is up 0.23% after earlier rising as much as 0.5% to the highest since May 23. US Treasury yields rose across the curve, with the 10-year yield up 3 basis points at 3.05%.

• The ECB meeting will be the main global event on Thursday. Christine Lagarde’s remarks will be parsed for indications that a July hike of as much as 50 bps is in the cards.

USDINR Technical Observations:

• USDINR June futures formed Bearish Doji Candlestick pattern indicating indecisiveness.

• The pair has been holding support of 21 days exponential moving average currently placed at 77.58. • Derivative data indicating long unwinding fall in price and fall in open interest. However, the volatility remained low even after events.

• Relative Strength Index of 14 day turned negative. However, it has been oscillating above 50 indicating continuation of consolidation. ;

• MACD turned in weak on daily chart as it is heading south.

• In the near-term, USDINR June futures is expected to trade in the range of 77.50 to 78.10 with bullish bias.

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