FX – MORNING UPDATE :

USDINR opened at 82.66 on Friday and the pair traded in the 82.63-82.70 range. Spot USDINR closed at 82.65, gain of 8 ps for USD as against prior close of 82.57.

RBI reference rate was fixed at 82.65 on 25/08. Aug USD/INR closed at 82.64, gain of 7 ps for USD as compared to prior day’s close of 82.57. Aug Euro/INR closed at 89.37, GBP/INR at 104.25 and Yen/INR at 56.66. 1 year USDINR fwd premia was trading at around 1.63% p.a.  FX reserves stood at USD 594 bn as on Aug 18 th. FX reserves declined by USD 8 bn.

In Aug, FPI’S have bought Rs 11464 Cr of Equities and bought Rs 5692 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 120 points (0.62%) on Friday. US S&P climbed 29 points (0.67%) . Nikkei declined 2.01% and Hang Seng declined 1.4%.

Euro is now at 1.0796, Pound at 1.2580, Yen at 146.46.

Commodities: Gold is now at USD 1943 and WT1Crude at USD 80/Brent at USD 85.

Interest rates: USD 10 Yr yield is at 4.23% and 3 m libor closed at 5.65%. Indian 10 yr benchmark yield closed at 7.20%.

Economic news: Indian Q1 GDP data, US employment data, Core PCE index are crucial data events for the week.

In a symposium speech, Fed Chairman Powell maintained that they “are prepared to raise rates further if appropriate” and reiterated the pledge to “hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.” On easing of inflation, Powell took a conservative stance by emphasizing that “two months of good data are only the beginning of what it will take to build confidence.”

Fed fund futures are currently still pointing to a hold in September, with 80% chance. Yet, in the wake of Powell’s address, the odds favoring a 25bps rate hike either in November or December rose above the 50% mark.

ECB Chairwoman reiterated that “It’s critically important that inflation expectations remain anchored at 2 per cent.” Lagarde reinforced that the ECB is “deliberately, decisively data-dependent” and committed to taking decisions one meeting at a time.

USD gained as EU and UK PMI data went into deep contraction mode, putting both central banks in a quandary over future rate hikes. Pound declined as economic outlook was gloomy due to deep contraction in services sector also. Even though BoE is largely anticipated to further tighten its monetary stance by raising rates to 5.50% next month, the futures market has grown more skeptical.

Data highlights: – – No major data release.

Monday’s calendar : No major data release.

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 82.70. 50 day moving average is at 82.35.200 day moving average is at 82.25. Daily MACD is in sell zone. Important support is at 82.35/82.25 and important resistance is at 82.70/82.86/83.14. Spot closed below the average level of the day.

Intraday supports and resistances for Aug contract are:

PP: 82.65, S1:82.57, S2:82.52, R1:82.70, R2:82.78.             

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 82.35.

CROSS CURRENCY TECHNICALS:

EURO/USD: The pair is below major moving averages. Major resistance is at 1.0925/1.1065/1.1140/1.1275. Next major support is at 1.0765/1.0635. Daily MACD is in sell zone, implying an important top at 1.1275. Weekly MACD is in sell zone, implying important top at 1.1275.

GBP/USD: The pair is still above 200 day moving averages, but below 50 and 100 day averages. Daily MACD is in sell zone, implying important top at 1.3145 and weekly MACD is in sell zone, implying important top at 1.3145. Important support is at 1.2350. Important resistance is at 1.2820/1.30/1.3145.

USD/YEN: The pair is above 50 and 200 day major averages. Daily MACD is in buy zone, implying important bottom at 137.35. Important resistance is at 147 and support is at 144/142.