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D-Day

* The dollar steadied on Tuesday as traders looked ahead to U.S. midterm elections, and as excitement dimmed around China relaxing coronavirus restrictions, which had been boosting investor sentiment and weighing on the safe haven U.S. currency.

* A conclusive result to the midterms could take days, but forecasts are for a Republican victory, at least in the House of Representatives, and consequently likely gridlock in Congress.

* The aggressive pace of U.S.rate hikes has caused U.S. Treasury yields to rise and pushed the dollar to multi-year highs against most major currencies, though speculation is growing thatthis trend is starting to come it its end.

* As a result, the dollar index, which tracks its performance against six major currencies was at 110.4 down fromas much as 113.5 themiddle of last week

* The Japanese yen also firmed to a one-week high of 146.15 per dollar. Japanese foreign currency reserves posted the second-sharpest monthly decline on record in October as authorities spent 6.35 trillion yen ($43.37 billion)intervening to supportthe yen.

* Another factor that has weighed on the dollar in recent days was speculation that China might relax aspects of its dynamic zero COVID policy.

* The yuan had its best day in two years on Friday, and has held most of those gains since, but gave back a little bit through Tuesday to trade at 7.2612 per dollar asfresh COVID-19 outbreaks chipped away atsome of the optimism.

Technical Observations:

* USDINR Future has breached the important support of 82.10

* Trend of the underlying has turned bearish for the short term

* Underlying has formed bearish head and shoulder pattern on the daily chart

* Momentum indictor MACD has turned bearish on daily chart

* RSI has exited the overbought zone and has also reached below benchmark level of 50, which indicates weakness in the Dollar against the rupee

* USDINR futures have got strong resistance at 83 and unless that is taken out, view would remain bearish for the pair

* Next possible target for the pair is seen around 80

* Traders should cut long positions and initiate fresh short positions

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