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The forex market was on the edge on July 27 as the rupee slipped below 44 against the dollar. But it did not sustain there and closed the session at 44. The rupee is currently biding its time in the band between 44 and 44.2, eyeing the goings on in US. Weakness in the equity market and FIIs turning indecisive over the past week are also preventing further appreciation in the currency.
Despite the resolution of the US debt ceiling stalemate on Monday, financial markets continued to be nervous as US' Institute of Supply Management's manufacturing index dropped to 50.9, a two-year low.
Slowing second quarter GDP growth in US also hurt the currency and retained the dollar index below 74.5. Short-term resistances for this index are at 74.7 and 75.5. Failure to move above the first resistance will mean that the index will weaken in the near future.
Dollar-rupee outlook : The dollar-rupee pair rebounded from the low of 43.8 last on Wednesday. As explained earlier, this is the third time the currency pair is reversing from this hurdle. Immediate supports for the rupee are at 44.45, 44.64 and then 44.83. Inability to move below 44.45 will mean that the currency will turn lower to test the 43.8 hurdle again.
But the key short-term trend decider is 44.8. Presence of the medium-term trend line coupled with the evolving pattern on higher troughs since January means that the currency could halt its decline at this level. We therefore retain a positive short-term view as long as the currency trades above this level.
The long- and medium-term trends in this pair continue to be up and as long as it trades above 44.8, the possibility of a sharp rally above 44 remains open.
USD-INR futures: USD-INR futures did not decline to our downward target at 43.4 but reversed higher from the low of 43.84 instead. Immediate resistances for the contracts are at 44.4, 44.66 and 44.84. Traders can initiate fresh shorts if the contract fails to move above the first resistance.
The contract can then move lower to 44.3, 44 or even 43.8. Short-term view will turn positive only if the contract moves above 44.8. Traders can continue to sell on rallies as long as the contract trades below this level.
EUR-INR futures: EUR-INR pair reversed lower from the peak of 64.25 in line with our expectation and attained our second lower target at 62.9 on Tuesday. Fresh short positions are advised only on decline below 62.9. Subsequent targets are 62.6 and 62.1. Resistances for the days ahead would be at 63.7 and 64.2.
GBP-INR futures: GBP-INR futures too moved to the resistance of 72.8 mentioned in our last column. Traders can hold their longs with the stop at 72. The contract can then attempt to move higher to 73.2 in the upcoming sessions. Supports below 72 are at 71.8 and 71.6.
JPY-INR futures : JPY-INR futures moved above the immediate target at 57 to attain the peak of 57.5 on Tuesday. The short- as well as medium-term trend in the contract continues to be positive and we retain the target of 58.2 for the medium-term. Traders can hold their long positions with stop at 57.
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