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Dollar Rally Pauses as Risk Assets Jumps

* The Indian Rupee is likely to open slightly higher amid a sharp surge in risk assets and foreign fund inflows. The S&P 500 jumped almost 3%, with all 11 industry groups rising. Indian equities are expected to open higher taking cues fromother Asian indices.

* On Tuesday, spot USDINR fell 3 paise to 79.95 after touching 80.06 in morning trade. Suspected RBI intervention, weaker dollar index and strong risk-on moods pushed the dollar lower against the rupee. Though, the trend is bullish near term profit booking can’t be ruled out amid broad-based weakness in the greenback. Technically, spot USDINR is having resistance at 80.30 and support at 79.70.

* The dollar pared some of its losses Tuesday while declining for the third day and underperforming almost all of its Group-of-10 peers aside from the Japanese yen. A dollar gauge has shed about 1% this week, underscoring waning haven demand for the greenback and a brighter mood in markets. The euro hovers around a two-week high against the dollar on the possibility of a bigger-thanexpected European Central Bank interest-rate hike Thursday. There is little expectation Japan’s central bank will become less accommodative when it meets this week. Therefore, USDJPY was at 138.08, pulling the pair back toward the 24-year high of 138.39, which hit last week. Elsewhere, crude oil slipped below $104 a barrel.

* US Treasury yields are off their highs, and investors have scaled back forecasts for the most aggressive Fed tightening, suggesting this year’s surge in the greenback can take a break.

Technical Observations:

* USDINR July futures formed open equals to low indicating bullishness.

* The pair has been trading well above the short-term moving averages with bullish sequence 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 small indicating bullish trend.

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

USDINR July Daily Chart

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