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Rupee is in for Rough Start on Dollar Demands

* Indian rupee is expected to open slightly lower and head for a worst quarterly decline after March 2020. The risk-averse sentiments, higher crude oil prices, weaker regional currencies, slower growth, higher CAD and foreign fund outflows are the few factors to mention for the rupee depreciation. The sentiment for the rupee remains bearish till we see improvement in domestic macro and foreign fund inflows.

* On Tuesday, spot USDINR gained 42 paise or 0.54% to 78.77, after broadly remaining in a narrow range of 78.20 to 78.35 in the previous three days. Month-end dollar demand, quarterly rebalancing and short supply of dollars pushed the pair to an all-time high level.

* Technically, spot USDINR is expected to start higher and crossing 78.85 will pave way for 79.05 while the support has been shifted to 78.40, the recent top resistance.

* A gauge of dollar strength is higher amid month-end rebalancing flows and haven demand as US shares fall. US Treasury yields shift higher but pare gains after US consumer sentiment and Richmond Fed activity index missed forecasts.

* Stocks dropped in Asia on Wednesday on renewed worries about a gloomy economic outlook as monetary policy tightens in much of the world to fight high inflation. Elsewhere, Oil is oscillating near $111 a barrel on supply risks.

* Looking ahead, the start of July can be pivotal for trend followers, and volatility is piling up around upcoming central bank meetings. A sudden policy shift could upset an anticipated seasonal calm in market activity.

Technical Observations:

* USDINR July futures formed a bullish candle and closed at an all-time-high level indicating the continuation of the up trend.

* The pair has been holding a bullish sequence of the higher top higher bottom.

* It has the support of 21 days exponential moving at 78.35.

* Derivative data is indicating a fresh long position with a surge in price and open interest. 

* Relative Strength Index of 14 days entered in an overbought zone suggesting positive momentum.

* USDINR July futures is likely to trade higher with resistance at 79.50 and support at 78.90.

USDINR July Daily Chart

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