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Higher Crude Oil Prices to Weigh on Indian Rupee

Indian rupee expected to open steady following lackluster trading in dollar and Asian currencies. The local currencies expected to trade with negative bias amid higher crude oil prices and weaker global equities after overnight surge in crude oil prices. The dollar held steady ahead of FOMC Minutes while Japanese yen, euro all staying within a tight range.

The breakdown of talks at the OPEC+ meeting and the FOMC minutes Wednesday may send dollar and Yield a bit higher today when US open after Monday’s Independence day holiday. Brent rose above $77 for the first time since 2018 after OPEC+ failed to reach a deal on restoring curtailed output.

On Monday, USDINR fell 0.6% or 44 paise to 74.31 in thin volume trade on account of US holiday. The expectation of foreign fund inflows from series of IPOs and risk-on sentiments likely to support at one end while higher crude oil and dollar index to weigh on rupee, all in all the pair is expected to trade in the range of 74 to 74.50 before heading higher.

There has been a notable divergence in global risk appetite over the last couple of months with Asia equity investors dialing it up and those in the U.S. and Europe paring back. Indian benchmark Nifty rallied 0.71% to 15834.

The net aggregate dollar positioning versus G10 currencies reported by CFTC moved from - 5.9% to -4.6%, with net shorts reaching their lowest level since April. EUR and GBP appeared to have been the main victims of the dollar’s short-squeezing.

Aside from oil’s surge, investors are watching for a potentially more hawkish tilt at the Federal Reserve. Minutes from the Federal Open Market Committee due Wednesday will help gauge where members are on the tapering timeline. 

USDINR

USDINR July futures formed bearish Engulfing candlestick pattern indicating bearishness.

The pair still hold the support of 13 DEMA.

Momentum oscillator, relative strength index of 14 days period exited from overbought zone with negative cross over indicating weakness in the pair.

The pair resisted at 75.08, the 61.8% golden ratio adjoining of high 76.49 and low 73.

USDINR July futures has support at 74.25 and resistance at 74.70 in today’s trade with bias remaining on lower side.

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