USDINR resistance placed at 83.10, support at 82.30; All eyes on FOMC meeting minutes

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By Dilip Parmar

The Indian rupee ended the previous week on a sour note following a rebound in the greenback and weaker Chinese currencies. The local unit marked the second weekly decline in a row to settle at 82.77, the weakest closing since February 2023. Even after strong foreign fund inflows, the rupee tumbled post 82.50. So far this month, foreign institutions have bought worth $753m equities and $163m debts. 

RBI has also aggressively added dollars in forex reserves and sucked the liquidity from the market. India’s forex reserves rose to $599.53, up for the third week in a row and touched the highest level since June 10, 2022. Over the weekend, the RBI said it will withdraw the highest-value currency note from circulation which will improve the liquidity in the system and in turn push the short-term yield lower and push the rupee lower. 

Spot USDINR Technical Outlook

Technical set-up for spot USDINR turned bullish last week by sustaining above 82.30 and forming a bullish sequence of higher tops and bottoms, on the daily chart. The pair has resistance at 83.10 and support at 82.30.  

Overseas Market

On Friday, the dollar declined for the first time in four days, paring its weekly advances to 103.20, up 0.50 and the second straight week of advances, as Fed Chair Jerome Powell offered a clear signal of a June rate pause. Powell said policymakers can now “afford to look at the data and the evolving outlook to make careful assessments.” 

Euro trading back and forth around 100 DMA at 1.0808 as ECB is at a key juncture because it needs to keep preserving its monetary policy just as CPI growth shows signs of slowing.  While the Pound manages to trim losses ahead of UK inflation data next week for signs of cooling price pressures following base effects. 

Global Forex Position

Leveraged funds switched to net long Euro of 3035 from a net short of 760 while increasing the net short position in JPY to 42720 and lowering the net GBP short to 3207. While Asset managers reduced net JPY long, decreased net EUR long and reduced net GBP long in the week gone. The aggregate dollar short increased by about $1.6 billion as per the CFTC report. 

What to Watch 

In the week ahead, minutes of the May 2-3 FOMC meeting to reveal how the committee came to a rate of 5.25% as the peak, and PCE data to underscore the persistence of US inflation. UK CPI to show base effects dragging inflation down. China’s lenders are expected to keep prime rates steady and Japan’s CPI will show the Bank of Japan facing the wrong type of inflation. 

(Dilip Parmar is Research Analyst at HDFC Securities Ltd. Views expressed are author’s own.)


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