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 05, 2023
Place- New Delhi, India
USDINR
Between the 81.80 and 82.20 rhythms, USDINR has been swaying smoothly since mid-June on the spot market. The dance floor, otherwise known as the market, is feeling the groove of strong Foreign Portfolio Investor (FPI) inflows, a whopping $17 billion since March! This significant inflow has kept the USDINR pair from spinning out of control.
But wait, there’s more! The Reserve Bank of India (RBI) has reportedly joined the party, possibly through the forward market, preventing the USDINR from stumbling. Add in the uninviting low forward premium, and you’ve got carry traders shying away from the limelight. The result? A currency pair that’s comfortable in its range.
Meanwhile, positional traders have taken a breather, leading to a decrease in USDINR futures’ tempo. But don’t be fooled, the options volumes are still buzzing, indicating that traders are eager to sell options.
Despite the mellow tune of record-low implied volatility, the allure of short option strategies like a short straddle, short strangle, or short iron fly remains irresistible. Why not try an intra-day scalping waltz, or give short straddles, strangles, and iron fly trades a whirl? Just remember, keep your moves small, and don’t forget your stop-loss partner. Watch out for 81.80/85 and 82.15/20 – the key support and resistance dance steps.
GBPINR
As GBPUSD displays its tango of volatility and USDINR maintains its steady beat, GBPINR finds itself without a dance partner to inspire a trend. The pair is likely to continue its solo performance of price consolidation. Key positions on the GBPINR July futures stage include 103.60 and 102.40 as support, while 104.20 and 104.50 act as resistance. The strategy for today? Buy on the dips! However, the US holiday may dim the lights and mellow the rhythm.
EURINR
In the grand ballroom of currency trading, EURINR is cutting a neat path between 89.00 and 90.00 on July futures. When plotting your dance steps, keep this range in mind. EURINR’s dance card is linked with USDINR, so any major move from the latter could make the former step out of line. While long-term strategies may find few partners here, there’s still an inviting beat for intra-day scalping.
JPYINR
Cranking up the tempo, USDJPY is on a roll, powered by increasing US bond yields. This fast-paced dance is turning heads, potentially even catching the eye of the Japanese Ministry of Finance for possible intervention. Until then, the Japanese yen is doing a slow drag, succumbing to bearish pressure. The JPYINR is in a downward trend, with support steps at 56.80 and 56.50 and resistance moves around 57.20 and 57.50. The mood on the dance floor? A continued slow slide.
Key Points to Consider
The global stock market scene was largely in the green on Tuesday, following the decision by Australia’s central bank to maintain its principal lending rate. This move complimented the positive vibes emanating from Wall Street, which recently marked a 15-month high, although U.S. markets were closed in observance of the Independence Day holiday.
Among the winners were stock exchanges in London, Shanghai, Paris, and Hong Kong, while Tokyo experienced a decline. An important element to note is the influence of commodity markets on these trends. For instance, oil prices escalated due to a collaborative decision by Saudi Arabia and Russia to persist with cuts in their oil production, a strategy designed to bolster oil prices.
Market Risks and Strategic Warnings
Despite the current upward trend, market strategists caution about potential risks to the buoyancy of U.S. stocks. This warning comes after the markets experienced a sharp rally in the first half of the year. As Chris Montagu from Citigroup Inc. observes, market positioning appears “very extended.” This is demonstrated by the surge of investors who placed bullish bets on U.S. stock futures towards the end of June. Goldman Sachs Group Inc. strategists also caution against disregarding the potential impacts of higher interest rates on stock markets.
A Shift in the Indian Market
In India’s Nifty 50 index, a significant change is set to occur on July 13. Larsen & Toubro’s subsidiary, LTIMindtree, is due to replace the Housing Development Finance Corporation (HDFC). This move highlights the continuous dynamism in stock markets, where companies compete for inclusion in significant indices.
Chinese Economic Indicators
On the economic front, China’s service sector growth in June was below the expected mark, according to a private survey. This weaker-than-anticipated performance, influenced by soft exports and local demand, raises questions about the country’s economic recovery pace. The Caixin services purchasing managers’ index read 53.9 in June, falling short of the anticipated 56.2, and a significant drop from May’s 57.1.
The Return of El Niño
From economics to climate, another significant global event is the arrival of El Niño. The U.N. weather agency announced the start of this major climate event, which is expected to result in increased global temperatures and extreme weather conditions. The World Meteorological Organization anticipates a 90% chance of El Niño persisting through the second half of the year, with a prediction of moderate strength at the very least.
Asia-Pacific Market Movements and Climate Impacts
The ripple effects of the services activity data release and the onset of El Niño are visible in the Asia-Pacific markets, which predominantly fell as investors processed this new information.
Nifty’s Record Streak
Back in India, the Nifty continued its upward climb for the sixth consecutive session, reaching an all-time high of 19434 on July 4. This increase saw the Nifty add another 0.34% or 66 points to its rising trajectory, closing at 19389. However, market watchers observed a “Hanging Man” candlestick pattern at the end of the session, which may signal a short-term reversal if the low of the candle (19300) is breached. For the time being, 19450 could act as a resistance level.
Disclaimer
The content provided by CurrencyVeda is intended solely for educational purposes. It should not be construed as financial or investment advice. Before making any investment decisions, we recommend that you consult with a qualified professional to understand the potential risks and rewards involved. CurrencyVeda assumes no responsibility for any financial losses incurred.
