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Hope of Recovery in The Rupee

* Indian rupee heads for the tenth monthly decline in a row following foreign fund outflows, hawkish central bankers and weaker regional peers. Such carnage in the rupee has been seen after 1991 when the currency fell for the tenth consecutive month. So far, the rupee has been down by around 11% to 82.48, after touching a low of 83.29 earlier this month.

* Foreign fund outflows: In October, foreign funds sold $5.5 million in equities and bought $119.2 million in debts. So far this year, they sold $22.56 billion in equities and $1.4 billion in debts.

* Forex Reserves: In October, the reserves fall by $8 billion to $524.5 billion and for the current year $109.1 billion. The central bank’s intervention, devaluation of non-dollar assets are fall in gold value are the reasons for the decline in forex reserves. The central bank has aggressively intervened in the forex market to lower the unwarranted volatility and protect the rupee from sharp depreciations.

* Indian Crude Basket Prices: One of the biggest contributors to India’s widening trade deficit is the import of crude oil, which accounts for 85% of domestic needs. This year Indian basket of crude oil prices appreciated around 25% after surging 47% in 2021.

* Technical Outlook: Spot USDINR has been making newer and newer highs every month since the start of the year but now the prices actions and momentum look overstretched and warrant a pullback in the coming weeks. The pair is having support at 81.90 and resistance at 83.50. We recommend booking profit in the pair on the bounce and complete exit below 81.90.

* Forex markets to have a lively start to November in store as investors brace for another likely rate hike from the Federal Reserve, Bank of England and speculation about RBI’s reply to govt. on uncontrollable inflation. Some of the biggest names in the global oil industry head to Abu Dhabi at a complex moment for oil markets roiled by geopolitics and demand headwinds. This will bring extra volatility in the energy market and in turn drive the EM currencies.

USDINR

Technical Observations:

* USDINR November futures formed a hanging man candlestick pattern on the weekly chart which is a trend reversal candlestick pattern, the confirmation of the same will come below 82.

* On the weekly chart, it is placed well above the 13 EMA indicating it is still in a bullish trend.

* Momentum oscillator, RSI of 14 weeks hovering in the overbought zone and could start weakening once the level of 82 breaks.

* In the short-term, USDINR Nov. fut. is expected to consolidate in the range of 82 to 83.50 and breaking 82 will confirm the trend reversal and we can see weakness. The view remains bullish as long as it holds the support of 82.

USDINR Weekly Chart

EURINR

Technical Observations:

* EURINR November fut. closed above the 13-week exponential moving average (WEMA) and also crossed the 55 WEMA for the first time in the current year.

* It has given an upward breakout from the descending trend line adjoining highs of 90.815, 87.75 and 83.93.

* Momentum oscillator, RSI of 14 weeks crossed the centre line of 50 and heading north indicating bullish momentum.

* Looking at the above technical evidence, the pair has given a trend reversal sign and is expected to head higher. Short-term traders can initiate long positions above 83 for the target of 85.30 keeping the stop loss below 80.90.

EURINR Weekly Chart

GBPINR

Technical Observations:

* GBPINR November fut closed above 13 WEMA and heading towards 55 WEMA.

* The pair has shown “V”-shaped recovery in the last couple of weeks.

* It has retraced 61.8% of the previous downswing from 102.58 to 85.19. It has now resistance at 98.4, the 76.4% retracement.

* Momentum oscillator, RSI of 14 weeks crossed the previous high and heading north indicating positive momentum going ahead.

* GBPINR Nov. fut is expected to trade positively and we could see the level of 98 odd levels while falling below 92.60 will negate the said view.

GBPINR Weekly Chart

JPYINR

Technical Observations:

* JPYINR November fut has been trading in a bearish sequence of lower top and lower bottom.

* The pair is having resistance at 57.70, the 13 WEMA and support at 54.70.

* Momentum oscillator, Relative strength index of 14 weeks exited from an oversold zone but price confirmation is needed for reversal.

* The bearish trend in the JPYINR November fut can continue in the coming weeks and a break of 57.70 will confirm the trend reversal. However, one should remain cautious at current level amid an oversold condition.

JPYINR Weekly Chart

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