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Rupee Outlook and Strategy

* The US dollar remained under pressure amid prospects of less aggressive monetary tightening form the Federal Reserve. The decline in price pressure and improving inflation expectation in the near term has brought confidence back among consumers. Yearahead inflation expectations dropped to a primary reading of 4.0% this month from 4.4% in December

* Rupee future maturing on January 27 closed with a gain of 0.21% to settle at 81.46 on Friday tracking a weak dollar

* The rupee is likely to appreciate further following weakness in dollar and rally in global risky assets. In the near term, US$INR is expected to trade on a weaker note and move towards the initial supports at 81.20, followed by 80.80. On the upper end 82 would act as key resistance. Further investors will focus on this week’s key US retail sales and PPI numbers to get fresh direction cues

Euro and Pound Outlook

* The Euro erased its earlier losses to settle above the 1.08 mark following improved eurozone industrial production data and optimistic global markets. Eurozone industrial production gained 1.0% against market expectation of 0.6%. Furthermore, the improvement in the trade balance numbers has also supported single currency

* The Euro is expected to trade with a positive bias amid strong economic numbers and higher global equities. The break of key resistance at 1.08 has opened the gates for EURUSD to rally towards 1.098 level. EURINR (January) is expected to move towards 88.80 as long as it trades above the key support of 87.80

* The pound gained on Friday as better-than-expected UK GDP numbers lifted investor sentiments. Data showed economy expanded by 0.1% in November compared to the market expectation of -0.2%. Softness in dollar and improved risk appetite in global markets on hopes of slower rate hike has helped the currency to maintain its gains above the 1.22 mark

* The pound is expected to trade with a positive bias as it moved above the key resistance of 1.2200. The next target resistance for the pair is near 1.2335. On the lower end the 200 day EMA at 1.211 would act as key support for the pair. GBPINR (January) is holding key support near 98.60 and is likely to rise towards 100.10 levels. Market participants will focus on Treasury select committee hearing on December financial stability report to get further cues

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