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- Aug 04, 2023
Place- New Delhi, India
USDINR
USDINR is currently in a range-bound state, with support levels at 82.70 and 82.55 in the August futures. Resistance levels are seen at 82.90 and 83.05. The currency pair has been hovering near the upper end of its range, close to the 83.00 mark on the spot market. Over the past 11 months, USDINR has faced multiple tops within the range of 82.70 to 83.00. Its progress has been hindered on occasions due to factors like suspected RBI dollar sales, exporter hedging, and speculative shorts. USDINR has shown reversals, leading it back to levels below 82.00. Caution is advised against initiating long positions at these levels. Traders may consider shorting with a well-defined stop loss above 83.00 or remain on the sidelines. Key support levels are at 82.40 and 82.00 on the spot market. However, if there’s a clear break above 83.00, it may signal a potential bullish trend, encouraging short-covering and providing an opportunity to go long with targets at 84.00 and beyond.
GBPINR
GBPINR exhibits an upward drift bias in the August futures. Support levels are at 105.40 and 105.20, while resistance is observed at 105.80 and 106.00. The currency pair started the day with a significant gap up following hints from the Bank of England (BOE) chief about further rate hikes. The UK money market is optimistic about the possibility of two more hikes before the year’s end, and the BOE expects inflation to decrease to around 5% by December, below their projected rate of 5.75%. Currently, the interest rate stands at 5.25%. GBPUSD has already rebounded from the support zone near 1.2600, indicating potential strength to drive GBPINR higher, possibly reaching 106.00 levels in August. However, traders should keep an eye on developments in the UK and global markets to gauge any shifts in the trajectory.
EURINR
The bias for EURINR in August futures is range-bound. Support levels are found at 90.60 and 91.00, while resistance levels are at 90.80 and 91.00. Economic activity in the US service sector showed continued expansion in July, albeit at a slower pace compared to June, as indicated by the ISM Services PMI declining from 53.9 to 52.7, missing the market expectation of 53. However, there was positive news on productivity, with US Q2 productivity rising by 3.7%, surpassing the expected 2%, though slightly lower than the advance estimate of 4.2%. Additionally, unit labor costs declined to 1.6%, contrary to the expected 2.6%. These mixed economic indicators led to the US Dollar Index encountering resistance around 103.00 levels, resulting in a rebound for EURINR, currently trading at 90.79. The range-bound bias suggests trading within the 90.60 to 91.00 range on August futures.
JPYINR
JPYINR shows a range-bound bias with support levels at 58.20 and 58.00, and resistance levels at 58.50 and 58.70 in August futures. The lackluster performance of USDJPY and USDINR indicates limited movement for JPYINR, projecting a range-bound pattern between 58.20 and 58.60 in August futures. Traders are advised to adopt range trading strategies with prudent risk management during this period.
Key Points to Consider Today
On Thursday, U.S. stocks experienced a third consecutive day of decline, with the S&P 500 leading the downward trend, as Treasury yields saw a sharp increase. The rise in bond yields gained momentum after the Bank of England implemented another quarter-point interest rate hike.
The yield on the 10-year U.S. Treasury note surged by 11.1 basis points to 4.188%, reaching its highest level at 3 p.m. Eastern since November 7. The equity markets were unsettled by news that the Treasury Department increased the size of its quarterly sale of longer-term debt for the first time in over 2 ½ years.
Energy stocks, on the other hand, benefited from rising oil prices following Saudi Arabia’s announcement to extend an oil production cut through September.
Productivity Growth and Business Sentiment
Official U.S. government data revealed that productivity grew at an annualized pace of 3.7%, raising hopes that wage growth might slow down and exert further downward pressure on inflation.
In China, the central bank governor pledged to direct more financial resources toward the private economy. This move indicated a renewed sense of urgency from authorities to bolster business sentiment amid weakening economic momentum.
Positive Projections for the Indian Economy
S&P Global projected the Indian economy to grow at an average annual rate of 6.7% until March 2031, driven by manufacturing and services exports and strong consumer demand. This projection remains despite short-term challenges from rate hikes and a global economic slowdown. S&P maintained its earlier forecast of 6% growth for the current fiscal year ending in March 2024. Even at this rate, India would be the fastest-growing economy among the G20 countries.
Asian Shares and Dollar Performance
Asian shares showed a mixed performance on Friday, while the dollar pulled back from a one-month peak. Investors were evaluating a slew of U.S. economic data that indicated a resilient labor market ahead of a crucial non-farm payrolls report scheduled for later in the day.
Nifty’s Performance
On August 03, Nifty experienced another down day, influenced by weak global cues. However, an end-session recovery helped cut some of the losses. At close, Nifty was down 0.74% or 144.9 points at 19,381.7. This marked the third consecutive session of decline, with Nifty forming a high wave type candle, suggesting the possibility of a small bounce and the formation of a lower top. The range of 19,563 to 19,300 is expected to be significant for Nifty in the near term. Selling pressure may persist on every rise, with large-cap stocks facing the brunt.
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.
