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The New Year has begun on a torrid note for financial markets in India with stock prices going into a tailspin and rupee depreciating sharply against the dollar. According to BSE, FIIs have net sold almost Rs 2,100 crore in secondary market in the last five sessions, applying downward pressure on the Indian currency.
Re-emergence of Euro zone's debt problems with Portugal being pressured to accept aid has sent dollar sharply higher against other major currencies. Japan's pledge to buy bonds issued by Europe's financial-aid funds brought some stability on Tuesday helping rupee appreciate slightly.
Dollar index has risen to the resistance at 81.3. Sharp rally beyond this level will take the index to 82 or 83.5.
Dollar-Rupee outlook
Rupee declined sharply against the dollar to record the trough of 45.5 on Monday. Recovery in Euro and stability in equity markets made the India currency rally to 45.1 in the last trading session.
Short-term trend in the currency is currently down and immediate resistances are at 45 and 44.6. If the currency fails to move above 45, it will indicate a propensity to decline to 45.5 or 45.9 in the days ahead.
Medium-term trend in the currency is sideways and it can continue to oscillate in the band between 44.5 and 46 in the days ahead.
USD-INR futures
USD-INR futures moved contrary to our expectation, and reversed higher to record the recent peak at 45.67. The contract faces immediate resistance around 45.8 and fresh longs are recommended only on a sharp rally above this level. Subsequent targets are 46 and 46.3.
Supports for the contract are at 45.2 and 45.15. Traders can initiate fresh long positions on a bounce from either of these levels.
EUR-INR futures
Outlook for EUR-INR futures have also deteriorated since the contract has now declined below the key medium-term support at 58.8. Traders can now play short as long as the contract trades below this level. Subsequent targets for the contract are 58.5 and 57.6. Short-term resistances for the contract are at 59.3 and 59.8.
GBP-INR futures
GBP-INR futures are in a short-term uptrend since the trough of 69.4 recorded on January 3. Traders can hold their long position as long as the contract holds above 70. Targets on a break above 70.9 are 71.4 and 71.6.
JPY-INR futures
This contract reversed lower from the resistance around 55.5. The short-term trend is currently down and it can slip to 54.3 or 54 in the near-term. Traders can hold their short positions with stop at 55.
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