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Rupee to Add gains Backed by Strong Regional Peers

* Rupee caught a decent bid to wrap up a rough week with a gain. It marked the second weekly advance along with most regional peers amid an improvement in risk sentiment as the yuan gains on the expectation of covid related relaxation in China. The foreign fund inflows in the primary and secondary markets also supported the rupee in the week gone. The foreign institutions were net buyers of $1.76bn in domestic equities, last week.

* Outlook: Last week, spot USDINR fell 3 paise to 82.44, Friday’s action erased the start of the week’s gains. Technically, the pair is still in the range with the downside support at 81.90 and resistance at 83. However, the momentum oscillators and indicators on the daily and hourly chart turned weak indicating higher level selling in the pair.

* India’s June import cover at 10.4 months from 11.8 months in March as per the RBI statement. The decline in forex reserves, devaluation of non-dollar assets and higher trade deficit were the reasons for the decline in import covers.

* India’s foreign exchange reserves rose almost $6.60 billion for the week ended September 28 to $531.08 billion. This is the biggest gain in nearly a year. FCAs rose $5.77 billion to nearly $470.85 billion on the back of valuation changes as the US dollar remained soft against major currencies. The value of gold reserves also rose to $37.762 billion, a gain of $556 million.

* Global Markets: Risky assets finished the week higher as traders gauged how fast China will ease its Covid Zero policy and an uneven employment report pushed the haven assets lower. The Chinese yuan posted the biggest daily rally in decades, oil jumped to the highest in more than three weeks and base metal prices also soared on Friday.

* CFTC Position: In FX, there was pretty aggressive dollar selling, notably against the euro (31k) and yen (25k). Speculators also bought sterling (3k). The aggregate dollar long fell by a punchy $7 billion and now stands at just $2 billion.

USDINR Nov.

Technical Observations:

* USDINR Nov. fut. has been consolidating in the broad range of 82 to 83.30 since the start of October month. The pair closed below the middle line of the Bollinger Band.

* Momentum oscillator, Relative Strength Index of 14 days exited from the overbought zone and weakened indicating near-term negative momentum.

* Long unwinding has been seen with a fall in price and open interest (Reference table on page 7). 

* Near-term bias remains neutral for USDINR Nov. fut. and breaking of 82 will confirmthe trend reversal.

EURINR Nov.

Technical Observations:

* EURINR Nov. fut. Started forming a bullish pattern of a higher top higher bottom sequence on the daily chart. However, it has broken the 21 DEMA.

* DMI is indicating a strengthening of the trend as the ADX line is rising while +DI is placed above -DI

* Long unwinding has been seen with a fall in price and open interest (Reference table on page 7).

* The bias remains bullish for EURINR Nov. futures with a downside stop loss below 80 while on the higher side 83 remains near term resistance.

GBPINR Nov.

Technical Observations:

* GBPINR Nov futures closed below a 21-day exponential moving average but the formation remains bullish with a higher top and higher bottom.

* Relative Strength Index of 14 days placed below 50 but the direction remains upward.

* Short buildup has been seen with a fall in price and a rise in open interest (Reference table on page 7).

* Looking at the overall technicalset-up, we don’t expect much downside in GBPINR Nov. futures and any level above 96 will resume an upward movement.

JPYINR Nov.

Technical Observations:

* JPYINRNov futurestrading in the broad range of 54.70 to 57.40.

* Relative Strength Index of 14 days is currently placed at 47 but the direction remained upward indicating positive momentum going ahead.

* DMI is turning bullish with +DI placed above –DI and ADX line heading north.

* Short build-up has been seen with a fall in price and a rise in open interest (Reference table on page 7).

* JPYINRNov. futures could broadly trade in the rangeof 55 to 57.40.

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