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All Eyes will be on FOMC for signal on QE taper - HDFC Securities

Indian rupee expected to continue its’ north bound journey in today’s trade ahead of the April month derivative contract expiry. Momentum has shifted slightly upward amid profit booking in dollar against rupee after many nations pledge to support country to fight against deadly virus. On Tuesday, spot USDINR closed at 74.66 fell 7 paise or one tenth percentage point. The pair is expected to trade in the range of 74.50 to 75.10 in coming days. However, the trend remains upward and this could be just a long unwinding after sharp surge in last couple of days.

Foreign selling of India's bonds accelerated in the past week as the yield on the benchmark 10- year government bond fell. The yield on the Indian 10-year government bond fell five basis points to 6.038 percent over the past week. The 5-day moving average of net foreign outflows accelerated to $16.6 million, falling below the 20-day average of $29.4 million in inflows, according to data from the Central Depository Services (India) Ltd.

Asian assets look primed for a quiet Wednesday as investors wait for what the Fed brings in the U.S. session. S&P500 and Dow moved a combined absolute value of only 0.031%, this is the 4th smallest day in last five year.

The dollar rose with Treasury yields after better than expected economic data. The pound fell the most in nearly a week against a stronger dollar, as allegations of sleaze continued to swirl around the U.K. government.

The focus will remain on FOMC meeting outcome later tonight as Central bankers worldwide will be watching the Wednesday decision of the Federal Reserve for signals on timing of QE taper. The Fed is expected to announce it will begin trimming its $120 billion in monthly asset purchases before the end of the year as the U.S. economy recovers strongly from Covid-19.

USDINR

USDINR May futures formed bearish candle for the fourth day in row suggesting fresh short build-up.

The pair has previous bottom support at 74.70 followed by 74.38, the 100 days Simple moving average. It has resistance at 75.30, the 200 days simple moving average.

Momentum oscillators and indicators on daily turned weak indicating weakness.

Today being an April month derivative contract expiry, we believe USDINR May futures could trade in the range of 74.70 to 75.10 with slightly negative bias.

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