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 04, 2023
Place- New Delhi, India
The USDINR exchange rate, which ranges between 81.85 and 82.10, started on a softer note. Despite a slightly lower commencement, a significant downward slide is unlikely today, given the cessation of trading in the US markets that restricts speculative activities and inflows. Global indications are rather inconsistent, with Asian equity markets undergoing a correction and the US Dollar ceding ground against leading currencies.
In light of the recent release of the US ISM manufacturing data, a reduction in manufacturing activity was registered for June. The ISM manufacturing PMI over the previous few months has persistently signalled an economic slowdown, but further confirmation from other markers like the housing market or consumer health remains awaited.
Traders looking to enter the USDINR market should note critical support levels at around 81.75 and 81.60 on the spot. On the flip side, resistance is projected near 82.10 and 82.20 on the spot. Trading strategies involving short straddle and short strangle should be undertaken with small position sizes and strict adherence to stop losses.
The GBPINR pairing, which fluctuates between 103.80 and 104.15, is likely to remain within its trading range given the volatility in the GBPUSD and the lack of a clear catalyst in the USDINR. The near-term outlook predicts continued price consolidation for GBPINR. Support and resistance levels are expected at around 103.60 and 104.20 respectively. However, due to the US holiday, this currency pair may display diminished volatility.
With a trading range of 89.30-89.60, the EURINR is range-bound due to the market’s anticipation of a rate hike from the Federal Reserve this month. Despite a weak US ISM report, the EURUSD failed to gain ground possibly due to an overflow of speculative long positions. Both bullish and bearish factors have already been accounted for by the market.
However, the ability of EURINR to establish a trend is contingent on USDINR’s performance. The broader trading range for EURINR, presently oscillating between 89.00 and 90.00 on July futures, should be considered by traders. Opportunities for intra-day scalping may arise, while positional trading opportunities may be limited.
Lastly, the JPYINR, with a trading range of 56.80-57.10, is likely to maintain a downward bias due to a potential rise in US bond yields fostering an upward momentum in USDJPY. This upward thrust could prompt the Japanese Ministry of Finance to intervene.
In the absence of such intervention, the Japanese Yen remains under bearish pressure. With support levels positioned around 56.80 and 56.50, and resistance levels near 57.20 and 57.50, the overall sentiment of the JPYINR market is leaning towards a downward trend.
Key Points to Consider Today
U.S. stocks registered minor gains on Monday, with the S&P 500 recording its highest closing in over 14 months. This happened in a brief trading session ahead of the Independence Day holiday, leaving investors assessing the potential broadening of the robust first-half rally led by tech giants. Major U.S. stock exchanges ended their trading day at 1 p.m. ET, while the bond market closed an hour later. The markets will remain closed Tuesday for the Independence Day holiday.
Manufacturing Index Drops to Lowest in Over a Year
The Institute for Supply Management’s (ISM) manufacturing index dropped to its lowest since May 2020, coming in at 46% for June, down from 46.9% in the previous month. This decline surprised analysts, who had forecast a slightly better figure of 47.3%. Business surveys released on Monday showed a slump in global factory activity in June, as sluggish demand from China and Europe clouded the outlook for exporters.
Deeper Yield Curve Inversion Signals Recession Worries
The spread between the 2-year and 10-year U.S. Treasury note yields reached its widest since 1981 at -109.50 in early trade, reflecting deeper inversion than in March during the U.S. regional banking crisis. This shift has heightened financial market concerns that a protracted Federal Reserve rate hiking cycle might push the United States into a recession.
IDFC First Bank Approves Merger Plan
In corporate news, the board of IDFC First Bank Ltd. greenlighted a proposal to merge with IDFC Ltd. and IDFC Financial Holding Co. The proposed share swap ratio for the merger includes the issuance of 155 IDFC First Bank shares for every 100 shares of IDFC held.
Asian Stocks Feel the Heat, Nifty Hits Record High
Asian stocks felt the pressure on Tuesday after Wall Street’s marginal gains on the eve of the Independence Day holiday. On the flip side, India’s Nifty continued its upward streak on July 03, marking its fifth consecutive session of gains and reaching a new lifetime high of 19345. With an additional 0.73% to its tally, the Nifty closed 133 points or 0.7% higher at 19322. The Nifty may face resistance in the near term around the 19350-19400 band while 19076 could offer support.
The information provided by CurrencyVeda is intended for educational purposes only. It does not constitute financial advice. Users are advised to seek independent financial advice before making any investment decisions. CurrencyVeda is not liable for any loss incurred based on the information provided.