Financial markets continued to be buffeted by the sovereign debt issue in Greece and other European economies. The hike in reserve requirement by People's Bank of China towards the end of last week only added to this turbulence. The rupee was, however, resilient and strengthened to 46.1 against the dollar. Strong industrial production numbers and expectation of major policy changes in the upcoming Union Budget coupled with stability in equity market contributed to the rupee's strength.
Dollar-Rupee outlook
The rupee appears to have finished a 3-wave down-move from the January 12 peak to the recent low at 46.8. It can now strengthen towards 45.8 or even 45.2 in the weeks ahead. The trend for the next month or two can be sideways between 45 and 47.8.
The long-term trend in rupee is up since last March. As we have been reiterating, unless there is a close below 47.6, the rupee can strengthen to 45 or 44 over the medium-term.
USD-INR futures
USD-INR future could not make any headway beyond the February 8 peak of 46.9 and declined to 46.1. As indicated in our last column, decline below 46.5 has turned the short-term trend downward. Immediate downward targets for this future are 46 and 45.9. Traders can initiate fresh long positions on a bounce from the zone between 45.9 and 46 with stop at 45.8. A rebound from here can take this future higher to 46.45 or 46.65.
Fresh long positions should, however be avoided on a close below 45.9, since that would imply that the decline would get deeper to 45.3.
EUR-INR futures
We had recommended fresh shorts in this currency future only on a close below 63.7. The EUR-INR future traded on MCX-SX closed below this level on February 15 and went on to the low of 62.7 on Tuesday. The trend in the underlying continues to be extremely weak despite the bounce in the last session.
Traders can hold their short positions with stop at 63.7. This currency pair can decline 1.5 to 2 per cent over the ensuing weeks.
GBP-INR futures
This currency future moved sideways between 71.7 and 73.4 on the MCX-SX over the past week. Since this sideways movement is observed after a strong down-trend, traders can play short in these futures with stop at 73.5. The short-term target for this pair is 71.8 and traders should watch out for sharp bounce from the zone between 71.6 and 71.8.
JPY-INR futures
JPY-INR futures declined from the peak of 52.5 to the low of 51.3 on Tuesday. Immediate support for this pair is at 51.1. Fresh shorts are suggested only on a decline below this level with the subsequent targets of 50.7 and 50.3.
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