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Rupee Fell to Record Low on Foreign Fund Outflows

* The Indian rupee extended its drop for the sixth month in trot and closed to a life low level of 78.98 a dollar, in June month. India’s expanding trade gap and capital outflows are raising new risks for the rupee, as the currency plunged to a record low it also adds to inflation woes.

* Going ahead path for the rupee remains patchy as multiple factors are unfavourable from domestic as well as from the overseas front. Whether it is capital outflows or dollar liquidity all are indicating further depreciation. The only factor which curbs the weakness in the rupee will be the central bank’s intervention and the government’s policy to incentivize the dollar inflows. In efforts to that, we have seen the government increases the import duty on gold while the central bank has aggressively intervened in forward and future in the last few weeks.

* India’s foreign exchange reserves, which can cover about 10 months of imports, have slumped around $50 billion from a peak in September to $593.32 billion, in the week of June 24 as the RBI search for a stable currency regimen to fight imported inflation. 

* Back to technical aspects, spot USDINR has been in a bullish trend with most of the indicators and oscillators in favour of bulls. The only thing which makes them uncomfortable will be overstretching of price in the last six months. There could be some relief rally which will be on the cards whether it is equities or currencies. USDINR is having support at 78.50 while on the higher side resistance is placed around 79.80.

* July is another month of volatile forex markets as the big three central banks, ECB, Federal Reserves and Bank of Japan, will meet again for rate setting. Though the market is already priced in for a rate hike from two of three banks, the eyes will be on their statements as in the last one-month period many commodity prices have tumbled which could ease the inflation worries.

USDINR

Technical Observations:

* USDINR near month futures gave an upward breakout from the upward sloping channel on the weekly chart.

* It has been trading well above shortterm moving averages on a daily and a weekly chart indicating the continuation of a bullish trend.

* The pair has been forming rounding patterns considered as Bullish formation.

* Momentum oscillator, Relative Strength Index (RSI) 14 weeks entered in overbought zone and spread between index and average is widening indicating continuation of upward momentum.

* USDINR July futures is expected to head towards the 80-81 range but before that, it could witness a pullback. The pair is having downside support between 77.50 to 78.

USDINR Futures Weekly Chart

EURINR

Technical Observations:

* EURINR July futures is having resistance at 21 weeks exponential moving average (WEMA) as last one year it tried a failed attempt to sustain above 21 WEMA.

* In the near term, the pair is having resistance at 84.28, the super trend line on a weekly chart while support remains between 81 to 80.50.

* Momentum oscillator, RSI of 14 weeks has been turning upward and currently placed at 46 indicating positivity for the pair.

* However, the Direction Movement Index of 14 still remains weak with +DI placed below –DI and ADX line heading lower.

* Looking at the above technical evidence, EURINR July futures could trade lower towards 81 as long as it closes above the 84.30 level.

EURINR Futures Weekly Chart

GBPINR

Technical Observations:

* GBPINR near month futures has been trading in a bearish sequence of lower top lower bottom on the weekly chart.

* The pair has been facing resistance at 97.99, 21 weeks exponential moving average.

* Momentum oscillator, RSI has been heading south with negative cross-over indicating continuation of downtrend in the pair.

* MACD has been placed well below the zero line and histogram bars are also negative indicating a bearish trend.

* Technical pieces of evidence suggesting a continuation of the bearish trend in GBPINR July futures.

* The pair is having near-term support at 93.75 and resistance at 97.99.

GBPINR Futures Weekly Chart

JPYINR

Technical Observations:

* JPYINR July futures formed a bullish weekly candlestick pattern after the Doji candlestick pattern on the weekly chart is considered a trend reversal. However, for confirmation, we will wait for the pair to cross the downward slopping trend line resistance of 59.50.

* While the pair has been trading below short-term moving averages, one should be cautious before going against the trend.

* Momentum oscillator, Relative strength index of 14 weeks given positive divergence and exited oversold zone indicating short term recovery.

* In the near term bias for JPYINR July futures will remains bearish till it closes above 59.50 while on downside it has support at 57.20..

JPYINR Futures Weekly Chart

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