FX MORNING UPDATE

USDINR opened at 71.95 Y’day and the pair traded in the 71.58-72.05 range. Spot USDINR closed at 71.66 y’day, loss of 15 ps for USD as against prior close of 71.81. RBI reference rate was fixed at 71.55 on Wednesday. Aug USD/INR closed at 71.67, loss of 19 ps for USD as compared to prior day’s close of 71.86. Aug Euro/INR closed at 79.26, GBP/INR at 87.46 and Yen/INR at 67.19.

Rupee recovered as markets were enthused by expected announcement on removal of FPI surcharge.

FII’S have nett sold  Rs 10639 Cr of Indian Equities in Aug . FII’S have nett bought Rs 54860 Cr of Indian Equities in this calendar Year till date. FII’S have pulled out Rs 22000 Cr of Indian Equities since budget day. FII’S have nett bought Rs 8240 Cr of Indian debt securities in Aug FII’S have nett bought Rs 27022 Cr of Indian debt in this calendar year till date.

Benchmark Nifty declined 1.62% on Friday. DOW climbed 623 points(2.37%) on Friday. Nikkei climbed 0.40%  and Hang seng climbed 0.50% on Friday.

Euro closed the week at 1.1142 ,Pound at 1.2282,Yen at 105.40.

Commodities: Gold is now at USD 1526 and WT1Crude at USD 53.80/Brent at USD 59.10.

Interest rates: USD 10 Yr yield is at 1.528% and 3 m libor closed at 2.15%. Indian 10 yr benchmark yield closed at 6.57%.        

Economic news: Govt announced measures to boost demand and increase credit flows. Auto sector measures include additional 15% depreciation on vechiles, lifting of ban on Govt purchase of new vehicles, clarification on BS 1V vechiles, deferment of higher registration charges till June 2020 and a proposed scrappage policy.                                   

Banking measures included upfront infusion of Rs 70,000 Cr capital (which could increase lending up to 4 lac Cr by PSU’S), linking of borrowing rates to repo rate for effective rate transmission, freeing honest credit decision burden of bank officials from vigilance, and co origination of credit decision with NBFC clients. To free IT demands from arbitrariness, FM has announced centralised coding system and time bound settlement of IT demands. To eae MSME burden, Govt has announced that all pending payments will be cleared within 30 days and all payments in future will be cleared within 60 days.

For Capital markets, FM has announced scrapping of surcharge on capital gains, whicih would benefit both FPI and domestic investors. This is likely to encourage Equity inflows back, as FII’S have pulled out Rs 22000 Cr since July budget.

To boost development, FM has announced that Rs 100 lac Cr infrastructure development will be streamlined and monitored.

Trade war escalated as China’s Ministry of Commerce announced retaliation tariffs on USD 75B US imports. Additional tariffs of 5% or 10% will be imposed on a total of 5078 products lines originating from US. Goods include agricultural products, crude oil, small aircraft and cars.The first batch will take effect on September 1. Others will take effect on December 15.

US President retaliated by imposing further tariff on Chinese imports. Starting on October 1, tariffs on USD 250B in China imports will be raised from current 25% to 30%. The rate of the planned tariffs, to take effect on September 1, on USD 300B of Chinese products, will be raised from 10% to 15%. US President also asked US Companies to start looking for alternatives to China and bring home their manufacturing base or shift elsewhere.

Fed Chairman Jerome Powell noted that the three weeks since July FOMC meeting “have been eventful”. There were new tariffs on Chinese imports, further evidence in global slowdown notably in Germany and China. Also, there were geopolitical events including “growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government.”                                                                                          

Though, US economy has “continued to perform well overall, driven by consumer spending”. Job creation slowed but is “still above overall labor force growth”. Inflation seems to be “moving up closer to 2%. Powell pledged, “based on our assessment of the implications of these developments, we will act as appropriate.

US President criticised Fed Chairman again for his stubborness on not yielding to faster and aggressive rate cuts.

Data highlights : – US new home sales dipped to 635k.

Monday’s calendar:  – US durables order and German Ifo survey

USD/INR   71.98 71.55
EUR/USD 1.1142 1.1154 1.1051
GBP/USD 1.2282 1.2294 1.2193
USD/JPY 105.40 106.75 105.27

 

Daily Support/Resistance table

CurrencyPairs Pivot R1 R2 R3 S1 S2 S3
EURO/USD 1.1115  1.1180 1.1219   1.1076 1.1012  
GBP/USD 1.2256 1.2320  1.2358    1.2218 1.2154  
USD/JPY 105.80

 

106.33 107.28   104.86 104.32  

 

USD/INR 71.76 71.95 72.24   71.47 71.28  

 

 

                                                                                                                                               

MAJOR SUPPORTS/RESISTANCES AND TREND TABLE

Curency Pair Supports Resistances Trend Remarks
EURO/USD 1.1025 1.1250/1.1425 DN SIDE>1.1280
GBP/USD 1.20 1.2380 DN SIDE>1.26
USD/JPY 104.65 109 DN UP>109
USD/INR 71.45/70.85 72.10/72.45 UP SIDE<70.85
USD/CHF 0.97 0.9950 SIDE  UP >0.9950

Technicals: Spot closed above 50 and 200 day moving averages. 20 day moving average       is at 70.25. 50 day moving average is at 69.54.200 day moving average is at 70.25. Daily MACD is in buy zone, implying bottom at 68.30. Important support is at 71.45/70.85 and next important resistance is at 72.10/72.45. Spot closed below its average level of the day.  

Intra day supports and resistances for Aug contract are:

PP: 71.78,S1:71.47, S2:71.28, R1:71.97, R2:72.28                                                       

Hedging strategy for USD/INR: Hedging decisions be taken according to comfort and accounting rates.

CROSS CURRENCY TECHNICALS:

EURO/USD: The pair is below major moving averages. Next Major resistance is at 1.1250 Major support is at 1.1025. Daily MACD is in sell zone, implying an important top at 1.1250. Weekly MACD is in sell zone, implying important top at 1.1415.

GBP/USD: The pair is bearish and is trading below major moving averages.Daily MACD  is in buy zone, implying important bottom at 1.2050 and weekly MACD is  in sell zone, implying important top at 1.3385. Important resistance is at 1.2380. Important support is at 1.20.

USD/YEN: The pair is below  major moving averages. Daily MACD is in buy zone, implying important bottom at 105. Next important resistance is at 109 and later at 110.50. Important support is  at 105.

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