Welcome to our daily pre-market update, where we comprehensively analyze the Indian rupee’s performance in the currency markets. In this article, we will delve into the previous day’s trading session, examining the critical movements of the rupee against major currencies such as the US dollar (USD), British pound (GBP), Euro (EUR), and Japanese yen (JPY). Additionally, we will offer insights into what we can expect from the rupee in today’s trading session.
Date- July 20, 2023
Place- New Delhi, India
USDINR
USDINR is currently experiencing a downward drift, making it an attractive market for scalpers or day traders. These traders utilize USDINR options to quickly enter and exit the market, taking advantage of low spreads and minimal brokerage charges. While they book minimal profits, such as 0.0025, their larger trade sizes compensate for the smaller margins. However, scalping requires swift decision-making and high discipline, leaving no room for holding onto losing positions.
In terms of price levels, USDINR is currently trading within a range of 81.90 to 82.20 on the spot market. A decisive break below 81.90 could lead to testing the 81.60/70 levels, while an upward breakout above 82.20/22 may set sights on the 82.40/50 levels on the spot.
GBPINR
Following the release of UK inflation data, GBPINR experienced increased volatility. The year-on-year rate dropped to 7.9% from 8.7%, while the core CPI decreased to 6.9% from 7.1%. This undershoot in inflation led to reduced expectations for future Bank of England interest rate hikes, impacting UK bond yields and the value of the Pound. Additionally, the MPC is likely to approve a 25bp increase in Bank Rate instead of the expected 50bp increment.
The significant drop in GBPINR can be attributed to long liquidation. After a substantial climb from 103.50 to 108.00 over the past 11 trading sessions, GBPINR has recently experienced a robust price correction. It finds strong support around the 105.90/95 levels, and if this support breaks with significant trading volume, a further downward correction towards the 105.25/40 zone on July futures could be expected. Resistance levels are seen near 106.55 and 106.90.
EURINR
EURUSD and EURINR have been consolidating in the past three trading sessions. However, unlike GBP, the EUR has not undergone a significant correction. While the upside may be limited due to profit booking, it is advisable to consider buying EURINR on declines, with a stop loss below 91.70 levels on July futures. Resistance is anticipated around 92.50/55 and 92.85/90 levels.
JPYINR
Following a retraction in USDJPY, JPYINR experienced a gap opening. Traders should exercise caution ahead of the upcoming Bank of Japan monetary policy meeting. Although the BOJ chief hinted at maintaining the status quo, historical trends show the BOJ’s tendency to bluff markets before surprising them with unexpected moves. In the short term, JPYINR is expected to fluctuate between 58.50 and 59.50 on July futures.
Key Points to Consider Today
The major U.S. indexes are experiencing a rally during this earnings season, with stronger-than-expected results driving the upward momentum. However, there have been some disappointments in the post-closing reports. Netflix reported second-quarter revenue that fell short of analyst estimates, causing its shares to tumble nearly 9% in after-hours trading. Similarly, Tesla’s stock is down as the company reported revenue and earnings that beat expectations, but its margins were below forecasts. Tesla CEO Elon Musk also indicated a slight decrease in Q3 production compared to the previous quarter.
The earnings calendar remains busy in the final two trading days of this week, with approximately 110 U.S. companies scheduled to report their results.
Earlier on Wednesday, the U.S. Commerce Department released data showing that Housing Starts in June rose at an annual rate of 1.434 million, which was below the expected level of around 1.475 million. Building Permits, at 1.44 million, also fell short of forecasts. Additionally, the strong starts reported for May were revised downward.
Despite signs of weakness in the housing market, the Federal Reserve is widely expected to raise its benchmark funds rate later this month as it continues its efforts to control inflation, which is currently running double the central bank’s long-term target of 2%. The probability of a quarter-point rate hike at the upcoming policy meeting of the central bank next week is nearly 100%, according to the CME FedWatch Tool.
The National Stock Exchange (NSE) will conduct a special pre-open session from 9 AM to 10 AM. During this session, normal trading in RIL shares will take place after 10 AM. As a result of the delayed trading in RIL, the computation of the Nifty50 index level will be based on the performance of 49 stocks during the pre-open session. After the closure of the special pre-open session, the discovered price of RIL and the indicative price of Jio Financial will be calculated simultaneously. The derived price of Jio Financial will be considered on a daily basis for the computation of the Nifty index value until it gets listed on the stock exchanges. Once Jio Financial shares are listed, the stock will become the 51st stock in the Nifty 50 index for a period of three days. This arrangement aims to allow volatility to settle and provide investors with time to adjust their portfolios.
The Nifty index continued its upward trajectory for the fifth consecutive day, reaching fresh all-time highs. The Nifty closed higher by 84 points or 0.42% at 19833 levels. The Bank Nifty outperformed the Nifty, gaining 0.57% and closing at all-time high levels. The Nifty remains in a strong uptrend, with support shifting to 19690 for the short term. The immediate resistance for the Nifty is expected around 20050 levels.
Indian markets are likely to open slightly lower, as expectations of softer U.S. markets in the evening prevail due to lower-than-expected earnings from Tesla and Netflix.
Disclaimer
CurrencyVeda provides information purely for educational purposes. We are not financial advisors or brokers. The content we provide should not be taken as financial advice or a recommendation to buy or sell any sort of investment or security. Always perform your own due diligence and consult with a licensed professional before making any investment decision.
