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Rupee could open slightly higher as Yen recovers

* Indian rupee expected to open slightly higher following a rebound in Asian currencies and lower crude oil prices. However, the sentiments and directional trend for the rupee remain bearish on the stronger dollar index and weaker macro environment. Spot USDINR gained 31 paise to 78.38, the lifetime high close. Technically, the pair is in a bullish trend and any dip toward 78 could be an opportunity for a fresh long for a target of 78.50 and 78.80 by keeping the stop loss at 77.70.

* USDINR 1-year annualized forward premiums slide below 2.99% for the first time since 2011. Central Bank doing offsetting its spot dollar sales with buy-sell swaps in forwards, that’s why premiums are falling.

* Asian stocks tottered Thursday, Treasuries held a rally and oil sank as investors analyse the economic outlook after Federal Reserve Chair Jerome Powell acknowledged the risk of a recession. Federal Reserve Chair Jerome Powell gave his most explicit acknowledgement to date that steep interest-rate hikes could tip the US economy into recession.

* The odds of the Fed’s rate-hiking cycle extending beyond the November policy meeting have diminished sharply as traders continue to price the prospects of a hard-landing and swifter policy reversal next year.

* US Treasuries were little changed after jumping in the Wall Street session, leaving policysensitive two-year yields at about 3.06%. The US 10-year note yield declined 12 basis points to 3.16%.

* The pound is under mounting pressure amid fears the Bank of England will be outpaced by the US in the fight against inflation as UK inflation hit 9.1% in May, which is another 40- year high. It slumped as low as $1.2162 yesterday, taking its losses against the dollar to nearly 10% this year.

* In commodities, crude oil futures fell below $102 a barrel Wednesday, which represents a 22% drop over the past two weeks and meeting the technical definition of a bear market. It was sapped by fears over the demand outlook. A raw-materials index is at the lowest since March.

Technical Observations:

* USDINR June futures closed above range and all time high level.

* The pair has been trading in bullish sequence of higher top higher bottoms on all time frames.

* Derivative data is suggesting fresh long positions as price rises along with open interest and volumes.

* Relative Strength Index of 14 day oscillating around overbought with upward directions.

* MACD has flatten on daily chart indicating consolidation in up trend.

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

* USDINR June futures could head higher towards 78.80 odd levels while support will shift to 77.90.

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