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 19, 2023
Place- New Delhi, India
USDINR
The Ministry of Industry in China recently drew attention to some daunting challenges being faced by the country’s industrial sector, which include a noticeable shortage in demand and a downward trend in revenue streams. These factors have contributed to the weakening of the Chinese Yuan against the US Dollar, triggering an upward surge in the USDCNH exchange rate following a fortnight of stabilization.
Market analysts foresee that this pair might put the June highs of 7.2860 to the test, and should it succeed in surpassing this barrier and maintain its momentum, it could potentially target the clustered peak values from the October-November period, which hover around 7.39. Such developments could profoundly influence other Asian currencies, most notably the Indian Rupee (USDINR), emphasizing the importance of meticulously tracking the fluctuations in the USDCNH exchange rate.
Meanwhile, the US Dollar Index has witnessed a pronounced slump over the past several weeks, hinting at a potential consolidation phase in the days ahead. This consolidating period might instigate unfavorable global signals for the Rupee. Nevertheless, the Rupee could derive some stability from strong inflows from Foreign Portfolio Investors (FPI). Consequently, the USDINR pair is likely to oscillate within the bracket of 81.90 to 82.22/25. Should the rates breach the 82.25 mark and hold steady, this could trigger a spurt in short covering, possibly driving the price toward the targets of 82.50/60. It would be prudent for traders to contemplate purchasing during market slumps with a stop-loss set below 81.90 on the spot, targeting levels at 82.22/25 and 82.50/60. However, it’s crucial to bear in mind that a closing price below 81.90 would rule out any prospects of a bullish run.
GBPINR
The GBPUSD and GBPINR currency pairs have exhibited a phase of consolidation over the previous four trading sessions as market participants eagerly anticipate the forthcoming release of the UK Consumer Price Index (CPI) report. Slated to be released today at 11:30 am, there’s a widespread expectation that the headline inflation figure will contract to roughly 8.00-8.10%. However, the core CPI, which excludes food and energy prices, is predicted to remain elevated at around 7.1%. Any unforeseen deviations in this core inflation metric could considerably influence the GBPUSD and GBPINR pairs.
Given that a 50-basis point hike is already factored into the market, there is limited scope for any negative surprises. Consequently, any elevated volatility in the GBPINR pair observed today could offer intriguing opportunities for investors. The market foresees potential support levels around 106.70 and 106.40, while resistance levels are anticipated near 107.20 and 107.55 for the July futures.
EURINR
The EURUSD and EURINR currency pairs have been in a stabilization phase over the last 72 hours. However, contrary to the British Pound, the Euro has yet to experience a downward adjustment. Despite the release of US retail sales and industrial production data that fell short of expectations yesterday, the EURUSD did not manage to stage a rally. The potential for upward momentum might be limited owing to profit-taking by investors. In this context, it might be wise for traders to consider purchasing the EURINR pair during declines, setting a stop-loss order below the 91.80 mark for July futures. Resistance is projected around the 92.40/45 levels.
JPYINR
Recently, the Bank of Japan’s head, Ueda, made comments that did not hint at any forthcoming changes to the yield curve control policy. However, past experiences caution us against taking such statements at face value, as the BOJ has been known to mislead the market with feints before major policy announcements, subsequently catching investors off guard with surprising changes.
Interestingly, the USDJPY pair has seen an uptick while the JPYINR pair has dipped overnight. In the near term, we might observe a continuation of this trend with further appreciation in USDJPY and a corresponding depreciation in JPYINR. It’s important to note that the JPYINR pair finds its support levels at 58.95 and 58.70, while its resistance levels are positioned around 59.30 and 59.55.
Points to Consider Today
On Tuesday, U.S. stocks made gains, significantly influenced by a series of impressive bank earnings reports, setting the Dow on a path for its most extended daily winning streak in over two years. In fact, the Dow registered gains for the seventh consecutive session – its longest such streak since March 2021, and it closed at its highest point since April 2022.
These developments come in the wake of a smaller-than-anticipated rise in retail sales. This has been received positively by the stock market, as it suggests that while the economy is still growing, it’s not at such a brisk pace that would compel the Federal Reserve to further implement interest-rate hikes in an attempt to control inflation.
Major U.S. banks reported on Tuesday that the higher interest rates have positively impacted their second-quarter profits, leading to a surge in their shares. Two of the largest financial institutions in the country, Bank of America and Bank of New York Mellon Corp, have profited from the Federal Reserve’s measures to increase borrowing costs in a bid to contain persistent inflation.
Shares of Morgan Stanley saw a significant boost, with a 6.45% surge – the largest single-day percentage increase since November 9, 2020, due to better-than-expected earnings as growth in their wealth management sector offset lower trading revenue.
The technology sector outperformed others, with Microsoft shares making a 4% gain to reach a record closing price of $359.49 following their announcement to levy additional charges for accessing new artificial intelligence features in their Office software.
Despite some signs of global economic recovery and a rush towards megacap tech stocks pushing the stock market upwards, investor sentiment remained somewhat pessimistic in early July, as revealed in the Bank of America Global Fund Manager Survey. Most surveyed fund managers are expecting a slowdown in global economic growth, with 48% predicting a global recession starting by the end of the first quarter of 2024.
In Asia, stocks showed mixed performance as corporate earnings were released. A fall in confidence among large Japanese manufacturers was reported in July for the first time in six months, according to the Reuters Tankan survey, indicating growing concerns among exporters about weakening overseas demand.
The Nifty closed at lower than opening levels on 18th July, indicating some intra-day profit-taking. A high wave type pattern emerged after a rise, signaling potential consolidation. The near-term trading range for the Nifty is projected to be between 19819-19612.
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.
