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Weaker Regional Currencies to Weigh on The Rupee

Indian rupee is expected to open slightly lower amid overnight weakness in the dollar index and weaker Chinese Yuan. The Chinese currency is expected to weaken further after the Communist Party Congress ends this weekend, as the central bank loosens its grip on the currency. The weakness in equities, foreign fund outflows, weaker regional peers and higher crude oil prices are likely to weigh on the rupee in today’ssession. The one-month forward USDINR indicates an opening of around 82.95.

Stocks in Asia look poised for a cautious open after another down day for US equities, with Treasury yields at the highest level since the global financial crisis.

On Thursday, spot USDINR ended at 82.76 with losses of 23 paise or 0.28%. The weakness was on the back of probable dollar selling by the central bank and recovery in domestic equities. However, the sentiments and trend of the pair remain bullish as long as it trades above 81.90 while on the higher side it has resistance at 83.50 and 84.25.

The consensus is that the Federal Reserve’s key overnight rate will peak at 5% in the first half of next year as the central bank keeps hiking in the face of stubbornly high inflation. If that’s correct, then the dollar will continue to add strength and stock valuations are likely to fall even further

The pound’s 1.1489, October high might transform into a longer-term peak if political instability continues, particularly at the Treasury.

The yen is poised for a 10th weekly decline, its longest losing streak in nine years, fueling speculation the authorities will intervene again to cap its losses. Any yen intervention by Japan’s Ministry of Finance needs to be at least $19.7b - the amountit did in September -- if markets are going to take it seriously

Technical Observations:

USDINR October fut. is expected to open higher and could further appreciate as the session progresses.

The bullish flag pattern is still intact on the daily chart and the target of the same is coming around 84.20 odd levels

The pair has been holding the support of 13 days exponential moving average which is currently placed at 82.35.

Momentum oscillator, Relative Strength Index of 14 days period has been oscillating in the overbought zone suggesting a continuation of positive momentum.

Long unwinding has been seen with the fall in price and open interest while the volume remained high following a surge in volatility,

USDINR Oct. Fut. is expected to trade right with higher side resistance at 83.30 and support at 82.40.

USDINR October Futures Daily Chart

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