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Haven Remains In Demand Even After Risk Assets Recovery

* The Indian Rupee could open flat taking cues from other regional currencies. Asian currencies are mixed against the U.S. dollar in the early morning session ahead of key events including the outcome of the BOJ's two-day meeting and the ECB meeting.

* On Wednesday, spot USDINR gained 4 paise to 79.99, marking another record high closing amid stronger dollar demand from importers and carry traders. Looking at the last couple of days’ price action, there is a chance of sharp appreciation in the pair before retracing towards 79.70. The pair is having resistance in the area of 80.30 to 80.50 while supportis placed at 79.70.

* Euro pull back from 1.03 to 1.019 amid the collapse of Italy’s coalition government and the markets don’t expect any support from ECB policy decision later today. The Euro could weaken if the ECB's anti-fragmentation tool disappoints and/or if the deposit rate is increased by only 25 bps instead of 50 bps. For money-market traders, the probability ECB delivering over a halfpercentage-point rate increase is fifty-fifty, following stories thatsuggested such a move is firmly on the table. However, the euro rally could fizzle out as punters have already added the euro long in anticipation of that.

* UK inflation pushed up to 9.4% from 9.1%, and further gains are expected which dragged the pound lower after a recent rally.

* The Bank of Japan is widely expected to leave policy unchanged in today’s meeting which will likely push up the JPY a bit higher. With no policy change expected, attention will be on growth and inflation outlook. It may revise inflation upward and the growth forecastlowersfor2022 and 2023.

Technical Observations:

* USDINR July futures made fresh all time high close.

* The pair has been trading well above the short-term moving averages with bullish sequence formation of a higher tops and higher bottoms on all major time frames.

* Relative Strength Index of 14 days hovering in overbought zone and made negative crossover suggesting exhaustion of positive momentum.

* MACD is placed above the zero line while histogram bar remains positive indicating continuation of bullish trend.

* USDINR July futures is likely to trade in the range of 80.30 to 79.80 with positive bias.

USDINR July Futures Daily Chart

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