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USDINR Exuberance is Due for a Correction - HDFC Securities 

Indian rupee depreciated in the week gone following surge in crude oil prices, higher trade deficit numbers and foreign fund outflows from secondary market. However, as the situation getting normal with rebound in risk-on sentiments and profit booking in dollar index, rupee could recover the lost ground in coming week along with other Asian currencies. So far this month, rupee is worst performing currencies after Japanese Yen among the Asian currencies as Brent crude oil prices gained more than 15% in last two months.

Last week, spot USDINR ended week with gains of 27 paise or 36 bps to 75.26 level. In another holiday truncated week, we expect pair to show long unwinding/ profit booking amid overbought conditions on daily as well as on an hourly chart. Technically, it has resistance at 75.70 and support around 74.50.

On overseas front, Dollar index retraced after touching one year high of 94.56 on Wednesday as rising equities damped demand for haven assets. The frustration of dollar bulls could extend beyond this week with the Dollar Spot index losing upward momentum amid overcrowded dollar positioning, risk reversals z-scores and technical analysis, which called for a correction. The greenback is having multiple highs and lows resistance between 94.70 to 95.

In FX, yen selling was the most notable feature of the week, with speculative shorts increasing by 12.9k contracts. On balance, traders bought most other currencies, including euros (3.9k), sterling (8k), Swissie (2.7k) and Aussie (2.4k).

US Treasuries fell as the 10-year inched above 1.57%, but more telling was the two-year yield climbing to its highest since February 2020. The short end of the curve has been under pressure since the Fed released minutes of its most recent meeting on Wednesday, which added to investor certainty of whether tapering will begin this year.

Technical Observations:

USDINR October futures formed multiple Doji Candlestick pattern with support of 75.30, breaking of it will lead to fall and we could see level of 74.70

The pair has been sustaining well above short term and long term moving averages.

In last couple of days, volumes were lower while price remained steady.

Momentum oscillator, Relative Strength Index of 14 days period exited from overbought zone with negative divergence and cross over indicating bearishness.

Momentum indicators are also started weakening on daily and hourly chart indicating short term profit booking.

USDINR October futures expected to show profit booking and we could see level of 74.70 while continue to get resistance around 75.80. Medium term bias remains bullish till it holds 74.30 level.

Technical Observations:

EURINR October futures given falling trend line breakout on daily chart, adjoining multiple highs of 90.82, 89.86, 88.87 and 87.63.

The pair has started trading above 55 days exponential moving average. However, the positive cross over of short term moving average to medium term moving average yet to seen.

Volumes have started picking with upswing in price indicating bullishness.

Momentum oscillator, Relative Strength Index of 14 days heading north with positive crossover indicating bullish momentum.

Momentum indicators are also picking stem and moving upward suggesting bullishness.

EURINR October futures expected to show sharp upward move in coming days.

The pair is having resistance at 88 and 88.87 while continue to hold support around 86.70.

Technical Observations:

GBPINR October futures has descending trend line resistance at 103.50, breaking of it will confirm the trend reversal.

Short term moving averages about to cross the medium term moving averages upward indicating positive trend.

Recent price appreciation seen with below average volum

Momentum oscillator, Relative Strength Index of 14 days about to enter in overbought zone indicating bullish momentum

Momentum indicator, MACD placed above zero line and histogram is making bigger buildings indicating bullishness.

Looking at the DMI indicator, GBPINR October futures expected to show sharp upward move in coming days

The pair is having resistance at 104.26 and support around 102.

Technical Observations:

JPYINR October futures has downward slopping trend line resistance around 67.50.

It has been trading with lower top lower bottom formation on daily chart.

Short term moving averages are placed below medium term moving averages. The pair has been trading lower with volume indicating bearishness

Momentum oscillator, Relative Strength Index of 14 days heading southward with negative cross over indicating weakness.

Momentum indicator, MACD placed below zero line.

ADX line on daily chart steadily weakening on daily chart indicating bearish direction.

JPYINR October futures has multiple bottom support around 66 which is likely to break in coming days following weakness in Yen. While continue to resist around 67.50

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