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 11, 2023
Place- New Delhi, India
USDINR
There was a notable presence of Federal Reserve representatives yesterday, with their primary message being the imperative need to augment interest rates, possibly twice more, and to hold them at these levels to guarantee that inflation is making headway toward its target. However, this message didn’t make a considerable impact on either the bond or currency markets. The Federal Reserve fund futures market showcases a nearly absolute probability of a rate surge to 5.50% within this month. Still, there exists an ambiguity concerning another rate increase prior to December.
It’s vital that we keep a close watch on this likelihood. Should the prospect of an additional rate increase enhance, the USD may garner interest from potential buyers. Yet, a more noteworthy point of analysis is the probability of a rate reduction in the coming year. An analysis of the Federal Reserve fund’s December 2024 futures contract reveals traders’ speculation that the Fed will reduce rates by 100-125 basis points, which counters the indications from the Fed’s dot plot. In the forthcoming weeks and months, we must diligently follow these probabilities. If traders lessen their rate-cut speculations, we might see a significant sell-off in long-duration bonds, which could negatively influence global equity markets and beneficially affect the US Dollar.
Speaking of today’s perspective, the USDINR might undergo additional downward stress due to the optimistic sentiment in global equity markets, a robust Chinese currency, and steady inflows from foreign portfolio investors (FPIs). We forecast that speculators might liquidate their long positions built the previous week, with exporters also participating for hedging purposes. Unless the Reserve Bank of India decides to take assertive steps to acquire USDINR, there’s a strong possibility of USDINR testing levels around 82.15/20 on the spot. A temporary support level is situated near 82.37. Utilizing option scalping and implementing short-term purchasing and liquidation strategies throughout the day may be fruitful. The trend stays bearish as long as USDINR isn’t trading above 82.66 on the spot.
GBPINR
The spotlight today is on the UK’s job report. There’s a strong consensus that an increase of 158K employees will have been recorded over the three-month period ending in May, keeping the unemployment rate steady at 3.8%. The predicted growth rate for the average earnings index, bonuses included, in May, is expected to hit 6.8%, surpassing the preceding rate of 6.5%. With the Bank of England (BOE) estimated to enhance interest rates by an additional 120-150 basis points, traders are eagerly looking forward to substantial wage growth coupled with a robust influx of job opportunities. Following a significant rise in GBPUSD and GBPINR since Friday, the market is vulnerable to any unfavorable surprises from the employment data. As such, GBPINR traders are advised to lean towards GBPINR options instead of futures, due to the possible increase in volatility post the data release. The long-term tendency remains on an upward trajectory.
EURINR
As US bond yields took a downward turn overnight, EURUSD continued its upward trajectory. Given its momentum, EURUSD is poised to challenge its various peaks around 1.11, as witnessed in April and May of this year. As a consequence, EURINR could potentially see enhanced buying activity. The focal point today is the German ZEW sentiment report. Support levels for EURINR in July futures lie around 90.60/65 and 90.40/45, while resistance is expected around 91.05 and 91.30. The general trend leans toward the bullish side.
JPYINR
USDJPY saw a dip due to the decline in the US Dollar Index coupled with the fall in US bond yields. This led to an upward shift in JPYINR. The resistance for JPYINR lies around the 58.90/95 mark, followed by 59.20/25. Support can be expected near the 58.40 and 58.30 levels. It is projected that JPYINR will witness further short-covering rebound in the forthcoming trading sessions.
Key Points to Consider Today
Monday saw U.S. stocks finishing strong, marking their first uptick in the last four trading sessions, as traders anticipated key inflation data for June and the onset of the second-quarter earnings season this week. By the close of the trading day, the optimistic view that the imminent U.S. inflation report might indicate a slowdown in price increases fuelled the equity market’s upward movement.
The consumer price index report for June, due Wednesday, is poised to sway the Federal Reserve’s decision on the number of additional hikes needed for its benchmark interest rate.
Several Federal Reserve officials voiced their opinions on Monday, advocating for more interest rate hikes to combat inflation that remains stubbornly high. However, they also indicated the nearing end of the current monetary policy tightening cycle of the U.S. central bank.
On Monday, heavyweight companies like Apple and Microsoft experienced a dip in their shares following an announcement by Nasdaq Inc of a rebalancing of its Nasdaq 100 index to counteract the benchmark’s “overconcentration.”
In the first quarter of 2023-24, the Union government has amassed Rs 4.75 lakh crore in direct taxes. As of July 9, the collected direct tax was 15.87 percent higher compared to the same timeframe last financial year. This collection represents 26.05 percent of the total budget estimates for direct taxes for FY 2023-24.
Foxconn, a lead supplier for Apple and a global manufacturing giant, withdrew from a $19.5 billion joint venture project with Indian conglomerate Vedanta that would have brought semiconductor and display manufacturing to the Indian state of Gujarat.
Asian stocks followed suit with Wall Street, posting gains after China reinforced its struggling property market. Chinese regulators encouraged financial institutions to negotiate extending outstanding loans to property companies, thereby ramping up pressure for more favorable terms.
The Nifty closed on July 10 with a 24 point gain, ending at 19356. The Nifty appears to be trapped within the 19300-19500 trading range. The market’s near-term direction will be decided by a breakout from this range on either side.
Disclaimer
Currencyveda provides content strictly for educational purposes. The information should not be construed as financial advice or recommendations. Readers should conduct their own research and consult with a professional financial advisor before making any investment decisions. Currencyveda is not responsible for any loss incurred due to the use of its information.
