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Rupee Outlook and Strategy

• The US dollar rallied on Monday as concerns over turmoil in the US banking sector eased after JPMorgan agreed to acquire First Republic Bank’s assets. Further, latest manufacturing data from ISM and S&P showed continued improvement in the sector. Additionally, 10-year yields rose above the 3.5% mark

• Rupee future maturing on May 29 appreciated by 0.02% on Friday amid lower oil prices and strong domestic equities

• The rupee is likely to trade with a positive bias amid soft dollar and decline in crude oil prices. Also, expectation of weakness in US JOLTS job opening numbers could weigh on the dollar. US$INR is expected to remain under pressure and move towards 81.60 as long as it trades below the 82.00. The bearish crossover of 20 and 50-day EMA would weaken the pair towards 81.60

Euro and Pound Outlook

• The Euro fell 0.45% yesterday amid a rise in the US dollar. Meanwhile, sharp downside were limited on expectation that ECB might raise the rates by 25 bps at Thursday’s policy meeting. Further, trading activity in Euro was subdued on Monday, with European markets closed for the Labour Day holiday

• The Euro is expected to hold the support of 20 day SMA near 1.096 and rebound towards 1.1020 levels amid expectation of higher CPI Flash Estimates. The eurozone CPI data is expected to rise towards 7% against previous reading of 6.9%. However, weakness in manufacturing numbers could limit its gains above 1.1020. EURINR is expected to hold the support of 89.50 and move higher towards 90.30-90.60

• The pound depreciated by 0.55% on Monday amid a rebound in the US dollar. The sharp downside was restricted amid expectation of further rate hike by BoE in its next policy. Further, a banking holiday in the UK leads to subdued activity. Meanwhile, a decline in UK 10 years bond yields weighed over the pair

• The pound is expected to consolidate in side the range of 1.2460-1.2550 ahead of key manufacturing and House price index numbers. The 20-day EMA at 1.2460 would act as key support to the trend. So as long as it trades above 1.2460 it is expected to rise back towards 1.2550. GBPINR is likely to move inside the range of 101.80-102.60. Only a close below 101.80 would weaken the trend towards 101.20-101

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