FX – MORNING UPDATE :

USDINR opened at 83.25 y’day and the pair traded in the 83.22-83.30 range. Spot USDINR closed at 83.24, loss of 2 ps for USD as against prior close of 83.26.

RBI reference rate was fixed at 83.27 on 19/10. Oct USD/INR closed at 83.24, loss of 2 ps for USD as compared to prior day’s close of 83.26. Oct Euro/INR closed at 87.89, GBP/INR at 100.93 and Yen/INR at 55.69. 1 year USDINR fwd premia was trading at around 1.72% p.a.  FX reserves declined by USD 3 bn and stood at USD 584 bn as on Oct 6 th.

In Oct, FPI’S have sold Rs 6916 Cr of Equities and bought Rs 3146 Cr of debt . In 2022-23 fiscal year, FII’S have net sold Rs 27593 Cr of Equities and have net bought Rs 838 Cr of debt.

Benchmark Nifty declined 46 points (0.24%) Y’day. US S&P declined 36 points (0.85%) . Nikkei declined 1.86% and Hang Seng declined 2.94%.

Euro is now at 1.0569, Pound at 1.2120, Yen at 149.93.

Commodities: Gold is now at USD 1974 and WT1Crude at USD 89/Brent at USD 93.

Interest rates: USD 10 Yr yield is at 4.98% and 3 m libor closed at 5.65%. Indian 10 yr benchmark yield closed at 7.37%.

Economic news: Fed Chairman asserted that while the option for an additional rate hike remains open, a prudent and careful approach will be the governing principle. His statement implies that Fed would extend its pause in coming meetings. Powell suggested that the surge in yields might be linked to growing concerns surrounding fiscal deficits and mentioned that the process of Quantitative Tightening could also be influencing it. Highlighting that the uptick in yields acts as a de facto policy tightening, Powell raised the possibility that this might reduce the need for aggressive rate hikes in the future. Powell emphasized, “inflation is still too high, and a few months of good data are only the beginning.” Powell indicated that persistent above-trend growth or sustained labor market tightness could trigger a reevaluation of the inflation outlook. Such developments “could warrant further tightening of monetary policy.” Underscoring the complexities and potential pitfalls ahead, Powell stated, Committee is “proceeding carefully.” 

Data highlights: – – US Weekly jobless claims declined to 198k and existing home sales climbed to 3.96 mn.

Friday’s calendar : -UK retail sales

 Daily Support/Resistance table

MAJOR SUPPORTS/RESISTANCES AND TREND TABLE

Technicals: Spot closed above 50 and 200 day moving averages.20 day moving average is at 83.20. 50 day moving average is at 83.03.200 day moving average is at 82.43. Daily MACD is in sell zone. Important support is at 83.10/82.80 and important resistance is at 83.35. Spot closed below the average level of the day.

Intraday supports and resistances for Oct contract are:

PP: 83.25, S1:83.21, S2:83.19, R1:83.28, R2:83.31.             

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

However on directional basis, suggest the following:

USD exports be hedged at 83.30/83.50. Imports be hedged at 83.10 for 3 months.

CROSS CURRENCY TECHNICALS:

EURO/USD: The pair is below major moving averages. Major resistance is at 1.0740/1.0945. Next major support is at 1.0450/1.0250. Daily MACD is in buy zone, implying an important bottom at 1.0450. Weekly MACD is in sell zone, implying important top at 1.1275.

GBP/USD: The pair is below 50 and 200 day averages. Daily MACD is in buy zone, implying important bottom at 1.2035 and weekly MACD is in sell zone, implying important top at 1.3145. Important support is at 1.2035/1.18. Important resistance is at 1.2330/1.2440.

USD/YEN: The pair is above 50 and 200 day major averages. Daily MACD is in sell zone, implying important top at 150.20. Important resistance is at 150.20 and support is at 147.50/146.50.