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Rupee to consolidate in Holiday Truncated Week - HDFC Securities 

* Indian rupee expected to appreciate in holiday truncated week amid sell off in dollar index and continuation of risk-on sentiments as domestic equities placed at record high. This week likely be another quite week same as last for forex market. There will be only three trading session this week as forex market will remain closed on Monday and Thursday on account of Parsi New Year and Moharram respectively. A slew of economic data is on tap, and trading is expected to be light ahead of the Fed’s Jackson Hole Economic Symposium at the end of the month.

* Indian rupee closed with 9 paise loss to 74.25 a dollar in the week gone on back of dollar demand from oil marketing companies.

* Technically, spot USDINR Is having support at 74 and resistance at 74.64. Near term bias for the pair remains bearish as markets started pricing-in recovery in economy and strong foreign fund inflows from FPI and FDI routes.

* Apart from the cool down in inflation one more positive development for the economy is record high forex reserves. India's foreign exchange reserves surged by $889 million to reach a lifetime high of $621.464 billion in the week which ended on 6 August, as per the RBI weekly report.

* Foreign portfolio investors (FPI) have made a net investment of Rs.2,085 crore so far in August in Indian equities, according to data from NSDL. The FPIs have made a comeback after a net outflow of Rs 11,308 crore in July

* A gauge of the dollar retreated most in a month while haven currencies held on to broad gains as investors grew more concerned about economic prospects after a report showed U.S. consumer sentiment fell to the lowest level in nearly a decade. Dollar remained weak as investors weighed whether the Federal Reserve may continue with its dovish stance following a plunge in consumer sentiment.

* Dollar longs are being partially unwound after a soft University of Michigan report. A custom index of 3-month implied in the Bloomberg Dollar index fell to 6.14%, its lowest level since February 2020.

USDINR

Technical Observations:

* USDINR August futures formed multiple Doji candlestick pattern on daily chart indicating indecisiveness among traders.

* The pair unable to cross the 20 days simple moving average. The gap between 20 DSMA and 50 DSMA get narrowed and we could see negative cross over in coming days indicating negative trend.

* Momentum oscillator, relative strength index of 14 days period heading southward suggesting bearish momentum.

* ADX line placed below 20 and weakening on daily chart suggesting continuation of downtrend.

* USDINR August futures expected to trade with negative bias and breaking of 74.23 will open level of 74 while on higher side 74.65 remains hurdle.

USDINR August Futures Daily Chart

EURINR

Technical Observations:

* EURINR formed Doji candlestick patter near lower band of the Bollinger Band, which could be a reversal.

* The pair has been trading with lower top lower bottom on daily and weekly charts.

* Momentum oscillator, Relative strength index of 14 days period about to exit from oversold zone indicating short term bounce in the pair.

* The pair may take support of lower trend line support of falling channel around 87 while the down trend will negate only above 88.25.

* We expect short covering bounce in EURINR August future and may see level of 88 odd level while on lower side 87 remains strong support.

EURINR August Futures Daily Chart

GBPINR

Technical Observations:

* GBPINR August futures closed below 20 days simple moving average.

* The pair is having resistance of gap and 20 DMA at 103 and 103.23. while on downside July bottom of 102.07 could at as near term support.

* Momentum oscillator, relative strength index of 14 days period heading towards oversold zone suggesting negative momentum.

* ADX line is placed 20 but negative formation with –DI above +DI suggesting medium term down trend.

* GBPINR August futures expected to trade with negative bias with initial short covering bounce which will be used to make fresh short selling.

GBPINR August Futures Daily Chart

JPYINR

Technical Observations:

* JPYINR August futures formed strong bullish candle after Doji candlestick indicating short covering in coming days.

* The pair is forming bearish sequence of lower top lower bottom on daily chart. It has been trading well below short and medium term moving averages.

* Momentum oscillator, RSI turns upward and given trend line breakout indicating reversal in the momentum.

* Short term trend for JPYINR remains negative until it sustains above 68.30 while on downside falling below 67.18 will open for 66.83.

JPYINR August Futures Daily Chart

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