The forex market was in doldrums in the past fortnight with the Japanese earthquake and tsunami and prospect of a nuclear disaster sending risk aversion soaring. The consequent sell-off in our equity market and FIIs withdrawing funds out of the country sent the rupee reeling lower against the greenback. This weakness was exacerbated by crude oil soaring higher as the Libyan strife intensified.

The dollar was under pressure because of the perception that the Federal Reserve would be slower to change policy rates compared to the European Central Bank. Strength in yen also acted adversely on the dollar index pushing it down to its lowest close in 15-months. Immediate support for this index is at 75.2. Next support is the November 2009 low of 74.97.

Dollar-rupee outlook

The rupee declined to 45.36 against the dollar on March 15 before stability returned to the financial market on abatement of fears regarding a nuclear catastrophe. The currency is currently testing the medium-term resistance between 44.9 and 45.

Chart pattern of the rally from March 15 trough implies that the Indian currency could find it difficult to move above this resistance zone just yet. Sideways move between 44.9 and 45.3 is possible in the ensuing weeks. Move above 44.9 can take the currency pair to 44.75.

Medium-term view for the currency will turn positive only on a move above 44.6 paving the way for re-test of the 44-level. Else the currency can remain in the range between 44.6 and 46.3.

USD-INR futures

USD-INR futures recorded the peak of 45.5 and declined after that. The down-move appears to be losing momentum and traders should stay wary with short positions as long as the contract trades above the support zone between 44.8 and 45. Upward reversal from the current level can take the contract higher to 45.2, 45.3 or 45.5 in the days ahead.

Targets on a strong decline below 45 are 44.8 and 44.4.

EUR-INR futures

EUR-INR futures made a surprise dash above the resistance at 63.4 to record the peak of 64.1 on Tuesday. Medium-term targets for the contract are 66.1 and 69. These targets are achievable as long as the contract holds above 63.4. Traders can therefore play long till the contract trades above this level.

Short-term supports are at 63.7 and 63.

GBP-INR futures

GBP-INR futures moved down to our first target at 72.5 before reversing higher. The contract can now move on to 73.9 or 74.5 in the days ahead. Supports will be available at 73 and 72.5.

JPY-INR futures

JPY-INR futures spiked to 57.8 on the day the Japanese earthquake and tsunami occurred. The contract is moving within an upward moving trend channel with the upper boundary at 56.5 and lower boundary at 54.3. The futures are now back within this channel. Fresh long positions are recommended only on a close above the upper trend channel.

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