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Rupee likely to open slightly lower but expected to rebound along equities

Asian currencies look for a steady to positive start after Chinese and U.S. commerce ministers agreed to push forward trade and investment links in their first call since the start of the Biden administration. USDINR is expected to open slightly higher following overnight strength in dollar index and lackluster risk assets. However, momentum could turn weak with recovery in risk assets. Technically, spot USDINR is having resistance at 73.30 and support in the area of 72.50 to 72.30.

Rupee slides for second day in row amid risk-off sentiments and stronger dollar demand amid higher crude oil prices. Spot USDINR ended at 72.98 with gains of 9 paise or 0.12% on Wednesday.

On Wednesday, US Treasuries rallied and US equities edged lower ahead of an US inflation report that may provide clues on the direction of monetary policy. The 10-year Treasury yield fell below 1.5% for the first time in a month, helped by a strong auction. The rate on the U.S. long bond dropped to a level unseen since March.

The trio of central bank meetings will kick off with today’s ECB meeting and finish with BOJ next week. Forex market traders await to see whether U.S. inflation data comes in strong or mild for direction as most of the currency traded in narrow range with low vol and volume. The combination of all those meetings and a well telegraphed U.S. CPI report will produce a benign outcome for risk assets and that favors the upside for euro and downside for dollar.

President Biden’s multi-trillion infrastructure plan is in trouble, which has the potential to bring a sweeping repricing in stocks, bonds and commodities, as Republicans moved to block the plan. The U.S. may still come up with a replacement bill, but it’ll probably fall short of the $2.3t Biden first planned.

USDINR

USDINR June futures formed another doji candlestick pattern below 13 days exponential moving averages indicating consolidations.

Momentum oscillators, relative strength index has been placed below 50 and flattening suggesting slower momentum.

Short term bias for USDINR June futures remains neutral.

USDINR June futures has support at 72.70 and breaking of the same will open for 72.40 while on higher side 73.40 remains the resistance.

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