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Dollar Approaching near the Overvaluation levels

* The Indian Rupee registered the first weekly gains after depreciating for the previous eleventh week on the back of a recovery in the risk assets. The dollar index slid for the first week in four. The ECB hikes more than anticipated hikes, as well as the growing conviction that the Fed is going to push the US into recession. The data weighed on the dollar, with traders marking down Federal Reserve rate hike bets from 75 basis points to 50 for September’s FOMC meeting. The FOMC is expected to raise rates by 75 bps again next week. No doubt investors will come away fromthe Powell press conference somehow convinced thatthat’s dovish.

* The euro gained last week, but much of the moves came on Tuesday after reports that the ECB would consider a half-point increase. The ECB’s new TPI tool for supposedly shoring up peripheral bonds failed to impress the market. While the Bank of Japan reaffirmed its commitment to its loose monetary policy.

* In the week gone, spot USDINR declined by 2 paise to 79.85. The bias remains bullish but we can expect a short-term pullback in the pair. It is having support at 79.70 and 79.30 while on the higher side resistance is placed at 80.30.

* The major flow was strong selling of euros, to the tune of 17.5k, taking the short position to its largest since the start of March 2020. The aggregate dollar long rose by $2.5 billion on the week, as per the CFTC data.

* Given the cumulative magnitude of the moves over the past year, the dollar beginning to approach the overvaluation levels that have been historically been consistent with a peak. So on a longer horizon, it seems plausible that the largest part of the Dollar appreciation is now behind us. Relief in growth and overtightening fears are also providing some respite for non-dollar currencies.

USDINR

* USDINR July futures failed to hold the level of 80 aftertouching a record high of 80.14.

* The short-term moving averages are placed above medium-term moving averages indicating the continuation of an uptrend.

* Momentum oscillators, Relative Strength Index of 14 days about to exit from an overbought with negative divergence indicating bearish momentum going ahead.

* Profit booking has been seen ahead of expiry week.

* The pair is likely to settle in July contracts in the 79.70 to 80.15 range.

* The bias remains bullish as long as USDINR July futures hold above 79.50 while on the higher side 80.15 and 80.30 remains the biggest hurdle.

USDINR July Daily Chart

EURINR

* EURINR July futures having resistance at 50 days simple moving average, currently placed at 82.23. The pair closed above 13 Days exponential moving average.

* However, it has been in a bearish formation of lower top lower bottom on the daily chart.

* Momentum oscillator, Relative Strength Index of 14 days given positive divergence and currently placed below 50.

* MACD has given positive cross-over and heading towards zero line along with a positive histogrambar.

* EURINR June futures to trade lower with downside support at 80.48 and resistance at 82.23. The bearish view will get negated once the pair closes above 82.25.

EURINR July Daily Chart

GBPINR

* GBPINR July futures closed above 13 days exponential moving average. The shortterm moving averages are placed below medium-term moving averages suggesting a short-termup trend.

* The pair is facing stiff resistance at 50 dayssimplemoving average.

* Formation of lower top lower bottom on daily chart indicating a short-term downtrend.

* Directional Movement index showing weakness with +DI placed below –DI and ADX line is going down.

* Momentum oscillator, RSI has been oscillating around 50.

* GBPINR July futures could remain weak as long as it trades below 96.30 while on the downside it is having support at 94.40 and 93.75.

GBPINR July Daily Chart

JPYINR

* JPYINR July futures closed above 13 Days exponential moving average, the first sign of recovery. 

* The pair is having strong resistance at 50 days simple moving average which is currently placed at 58.95.

* Momentum oscillator, Relative strength index of 14 days currently placed at 49 and heading north with positive crossover indicating near-termpositivemomentum.

* Directional movement index is indicating positivity with +DI placed above –DI and ADX line approaching towardscenterline.

* Short covering has been seen following rise in price and fall in open interest.

* JPYINR June futures expected to trade higher with resistance of 62 and support 59.35, the said view will be negated if it breakslevel of 59.35.

JPYINR July Daily Chart

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