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Haven Currency in Demand as Recession Fears Mount

* Indian rupee is expected to open with a gap up after Tuesday’s falls as overnight fall in crude oil prices and foreign fund inflows improve the sentiments. The implied opening from the forward market indicates USDINR could open 20 paise lower from the previous close of 75.36. Looking at the plunge in commodity prices, there could see some relief from the inflation front but the concerns over an economic slowdown will be dollar positive.

* On Tuesday, spot USDINR closed at 75.36 with a gain of half a percentage point, the best performer after the Singapore Dollar among Asian currency baskets. The higher trade deficit number and sour risk sentiments pushed the pair to the life high level. Technically, the bias for the pair remains bullish as long as it holds the support of 77.80 while on the upside 79.80 and 80 remain a major hurdle. The momentum oscillators on hourly and daily charts indicate some long unwinding in the coming days while the bullish trend remains intact.

* Stocks dipped in Asia on Wednesday as fears of an economic downturn lingered over financial markets, leaving the dollar hovering at the highest level in more than two years. The dollar rose against all major currencies except the yen, both of which benefit from when global growth concerns are rising, A gauge of the greenback’s strength rose as much as 1.2% to the highest since March 2020. The euro hit a 20-year low versus the dollar over concern about an economic slowdown in the eurozone.

* Elsewhere, West Texas Intermediate edged higher in Asia after collapsing by 8% to the lowest close since late April as mounting angst about a slowdown spurred a sell-off in commodities including crude.

Technical Observations:

* USDINR July futures formed a Bullish Engulfing candlestick pattern on daily chart.

* The pair has been trading in a bullish sequence of higher top higher bottom on major time frames.

* There is flag formation pattern on hourly chart with breakout above 79.55 with pattern target of 80.50.

* It has support of 13 days exponential moving average at 78.88.

* Relative Strength Index of 14 days hovering in overbought zone and strengthen further.

* +DI is placed well above –DI and ADX line strengthening indicating a bullish trend.

* USDINR July futures likely to trade in the range of 79.50 to 78.90.

USDINR July Daily Chart

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