FX – MORNING UPDATE :

USDINR opened at 82.99 y’day and the pair traded in the 82.99-83.05 range. Spot USDINR closed at 83.05, gain of 3 ps for USD as against prior close of 83.02.

RBI reference rate was fixed at 83.02 on 15/02. Feb USD/INR closed at 83.06, loss of 1 ps for USD as compared to prior day’s close of 83.07. Feb Euro/INR closed at 89.24, GBP/INR at 104.28 and Yen/INR at 55.48. 1 year USDINR fwd premia was trading at around 1.72% p.a.  FX reserves stood at USD 622 bn, as on Feb 2 nd.

In Feb, FPI’S have sold Rs 4814 Cr of Equities and bought Rs 12501 Cr of debt . In last calendar year, FII’S have net bought Rs 172853 Cr of Equities and have net bought Rs 70489 Cr of debt.

Benchmark Nifty climbed 71 points (0.32%) y’day. US S&P climbed 29 points (0.58%) y’day. Nikkei climbed 1.22% y’day and Hang Seng climbed 0.41% y’day.

Euro is now at 1.0762, Pound at 1.2583, Yen at 150.18.

Commodities: Gold is now at USD 2003 and WT1Crude at USD 78/Brent at USD 82.70.

Interest rates: USD 10 Yr yield is at 4.23% and 3 m libor closed at 5.52%. Indian 10 yr benchmark yield closed at 7.08%.

Economic news: US retail sales was subdued, reigniting hopes of rate cut in May. USD pulled back on weaker than expected sales data.

UK slipped into recession with GDP declining. UK GDP contracted -0.3% qoq in Q4, worse than expectation of -0.1% qoq. In FY 23, UK’s GDP saw a meager 0.1% growth, a stark contrast to 4.3% expansion in 2022. 

According to European Commission’s Winter 2024 Economic Forecast, Eurozone’s GDP growth for 2024 was revised notably downwards to 0.8% from Autumn’s estimate of 1.2%, reflecting a more subdued outlook than previously anticipated. 

ECB President highlighted that the “ongoing disinflation process” is expected to continue “gradually further down over 2024,” attributing this trend to the diminishing effects of past upward shocks and the impact of tighter financing conditions on inflation. She also noted a “gradual decline” in core inflation, which excludes energy and food prices, while also pointing out the “signs of persistence” in services inflation.

Japan’s economy also entered into technical recession as GDP unexpectedly contracted by -0.1% qoq in Q4, much worse than expectation of 0.3% qoq growth. 

Data highlights: – US Weekly jobless claims dipped to 212k, retail sales declined -0.8% m/m and core sales declined -0.6% m/m and industrial production declined -0.1% m/m

-UK GDP declined -0.1% m/m and -0.3% q/q.

-UK Industrial and manufacturing production climbed 0.6% and 0.8% m/m respectively.

Friday’s calendar : –  US PPI, Building permits and housing starts

Daily Support/Resistance table

MAJOR SUPPORTS/RESISTANCES AND TREND TABLE

Technicals: Spot closed below 20 and 50 day average but above 200 day moving averages.20 day moving average is at 83.05. 50 day moving average is at 83.14.200 day moving average is at 82.80. Daily MACD is in buy zone. Important support is at 82.80 and important resistance is at 83.15. Spot closed  above the average level of the day.

Intraday supports and resistances for Feb contract are:

PP: 83.05, S1:83.02, S2:82.99, R1:83.08, R2:83.10.             

Hedging strategy: Hedging decisions be taken according to comfort and accounting rates.

However on directional basis, suggest the following:

USD exports be hedged at 83.35/83.40. Imports be hedged at 82.92/82.80 for 3 months.

CROSS CURRENCY TECHNICALS:

EURO/USD: The pair is below major moving averages. Major resistance is at 1.0830/1.0890. Next major support is at 1.0725. Daily MACD is in sell zone, implying an important top at 1.1275. Weekly MACD is in buy zone, implying important bottom at 1.0450.

GBP/USD: The pair is between major moving averages. Daily MACD is in sell zone, implying important top at 1.2810 and weekly MACD is in buy zone, implying important bottom at 1.25. Important support is at 1.2480. Important resistance is at 1.2695/1.2775.

USD/YEN: The pair is above all major moving averages. Daily MACD is in buy zone, implying important bottom at 145.90. Important resistance is at 150 and support is at 146/144.35.

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