USDINR opened at 81.77 y’day and the pair traded in the 81.68-82.03 range. Spot USDINR closed at 81.93, unchanged for USD as against prior close of 81.93.

RBI reference rate was fixed at 81.85 on 01/02. Feb USD/INR closed at 82.02, unchanged for USD as compared to prior day’s close of 82.02. Feb Euro/INR closed at 89.40, GBP/INR at 101.10 and Yen/INR at 63.40. USDINR fwd premia was trading at around 2.35% p.a.  FX reserves stands at USD 573.75 bn as on Jan 20 th.  

In Jan, FII’S have sold Rs 13423 Cr of Equities till date and have bought Rs 2555 Cr of debt till date. In last Calendar Year, FII’S sold close to Rs 1.06 lac Cr worth of Equities.

Benchmark Nifty declined 45 points (0.26%) y’day. DOW closed flat (0%) y’day. Nikkei climbed 0.07%  and Hang Seng climbed 1.05% y’day.

Euro is now at 1.1019, Pound at 1.2387, Yen at 128.51.

Commodities: Gold is now at USD 1968 and WT1Crude at USD 77/Brent at USD 83.35.

Interest rates: USD 10 Yr yield is at 3.40% and 3 m libor closed at 4.81%. Indian 10 yr benchmark yield closed at 7.31%.

Economic news: Union budget focused on capital expenditure with boost to consumption through big relief in IT for tax payers. Capital expenditure was hiked by 33% to 10 lac Cr. Under new tax regime, income upto 7 lacs is exempted and slabs have trimmed to 5. Fiscal deficit is to come down to 5.9% of GDP. Market borrowings is expected to be 11.8 lac Cr. Agri sector is to to get Rs 20 lac Cr credit and MSME credit guarantee fund will receive Rs 9000 towards corpus. Affordable housing, Green hydrogen, Artificial intelligence, Agri startups, Pharma R&D, expansion of Digilocker, PAN as common business identifier were the other major features of the budget.

Indian Equity indices did not sustain highs hit soon after budget as Adani stocks continued its downtrend. USDINR pair swung between 81.68 and 82.02.

Fed raised rates by 25 bps and signaled its intention to push monetary policy further into restrictive zone. FOMC, raised its benchmark to a range of 4.5% to 4.75% from 4.25% to 4.5% previously. The quarter-point hike marked the second downshift from the Federal Reserve following a slowdown to 50 basis points at the December meeting after four-consecutive 75-basis-point hikes. “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time,” the Fed said in a statement. With Core PCE softening to 4.4%, investors would be anticipating rate hike pause. Fed Chairman acknowledged disinflation process in Core Goods sector, but said that it is yet to be evident in services sector. He also felt that labor market is tight enough to warrant further monetary restrictive policy.

US manufacturing data showed weakness as the momentum from slowing consumer goods demand continues to feed through to producers. The combination of changing preferences and higher financing costs have weighed on new orders as they have now contracted in six of the past seven months. ADP employment report and construction spending showed softness.

EU and UK PMI (mfrg) data also showed contraction in manufacturing.

ECB and BOE meetings along with ISM(non mfrg), and US employment data are key events for the coming week.

Data highlights: – US ADP employment report showed only 106 k jobs were added last month, ISM(mfrg) declined to 47.4 and construction spending declined -0.4% m/m.

-EU PMI(mfrg) was reported at 48.8, CPI climbed 8.1% y/y and unemployment rate climbed to 6.6%.

-UK PMI(mfrg) was in contraction mode at 47.

Thursday’s calendar : – US Weekly jobless claims, factory orders

Daily Support/Resistance table

 MAJOR SUPPORTS/RESISTANCES AND TREND TABLE

Technicals: Spot closed below 50 day average, but still above 20, 100 and 200 day major moving averages.20 day moving average is at 81.78. 50 day moving average is at 82.08.200 day moving average is at 80.02. Daily MACD is in buy zone. Important support is at 81.68/81.57/81.42 and important resistance is at 82.10/82.45. Spot closed above its average level of the day.

Intraday supports and resistances for Feb contract are:

PP: 81.96, S1:81.73, S2:81.44, R1:82.25, R2:82.48.             

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

However on directional basis, suggest the following:

Exports be hedged.

CROSS CURRENCY TECHNICALS:

EURO/USD: The pair is above 50 and 200 day major moving averages. Major resistance is at 1.0945/1.1045. Next major support is at 1.0740/1.0625. Daily MACD is in buy zone, implying an important bottom at 1.0480. Weekly MACD is in buy zone, implying important bottom at 0.9535.

GBP/USD: The pair is above 50 and 200 day moving averages. Daily MACD is in buy zone, implying important bottom at 1.1840 and weekly MACD is in buy zone, implying important bottom at 1.0380. Important support is at 1.2260/1.2160. Important resistance is at 1.2450/1.2750.

USD/YEN: The pair is below 20, 50 and 100 day moving averages. Daily MACD is in buy zone, implying important bottom at 127.25. Important resistance is at 131.50. Major resistance is at 131.60/134.

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