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Weaker Economic Data Weigh on Dollar

• Indian rupee closed on a flat note even after stronger domestic equity as crude oil pricesremained firm followingOPEC+ comment on an output cut.

• Technically, spot USDINR is expected to open lower but a risk-averse sentiment and higher crude oil price. The pair is having support at 79.25 and resistance at 80.10.

• The dollar suffered a sudden loss of momentum overnight thanks to weak PMI numbers. Minneapolis Fed President Neel Kashkari has acknowledged that a stronger US currency could help dampen inflationary pressures. However, the dollar strength could persist as long as the war in Ukraine rages on and energy pricesremain elevated

• Asian equities set for a steady open amid fresh questions about how aggressively the Federal Reserve can continue raising interest rates in the campaign against high inflation.

• The Chinese yuan’s tumble to its weakest against the dollar — which is approaching a record high - in almost two years. A falling exchange rate cushions exporters and provides an additional source of support as the People’s Bank of China lowers interest rates. But a weaker currency also accelerates capital outflows andmarket volatility.

• On Tuesday, US stocks gave back early gains to finish modestly lower on the S&P 500 and Nasdaq following notable selling pressure on Friday and Monday. US Treasurys likewise finished little changed, as the two-year yield fell to 3.29% despite a weak auction this afternoon, while the long bond edged higher to 3.26%.

Technical Observations:

• USDINR August futures has been consolidating in a narrow range of 79/75 to 79.97

• The pair is having support at 79.7, the 21 days exponential moving average.

• Relative Strength Index of 14 days hovering above 50 indicating lackluster movements with low volatility.

• ADX line is weakening on the daily chart and heading south while +DI and –DI flatten near 25, suggesting a weak trend.

• Overnight pullback in the dollar index could push the pair lower in the opening trade but the range will remain narrow.

• USDINR August futures could consolidate in the range of 79.30 to 80.10 in the near term.

• Medium-term trend remains bullish as long as the pair trades above 79 while on the higher side 80.40.

USDINR August Futures Daily Chart

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