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Highlights:
The US Dollar (USD) ended last week’s session at INR 62.30 versus the Indian rupee, lower by 0.60 percent, week on week, extending its losses to the second week in a row. The near- month February futures ended Friday's session at INR 62.45, lower by more than a percent for the week. The basis at the end of last week declined to + 0.1500 from + 0.4075 the week earlier.
Volumes in the front- month February futures were pegged at 4.39 million contracts during the week compared to 5.67 million contracts the previous week, registering a decline of more than 22 percent for the week. Open interest was lower by 17,413 contracts and stood at 507,864 during the week compared to 525,277 contracts the prior week.
In economic news, the Government of India on Friday estimated the Indian economy to grow at 4.9 percent for the financial year 2014. This is slightly above the GDP figures of 4.5 percent for the financial year ending 2013 and far below the initial estimates of more than a 6.5 percent growth. The trade deficit in January declined to $9.92 billion from $10.14 billion in December of last year, skidding more than 2 percent on the back of a slump in bullion imports according to the Ministry of Commerce and Industry.
USD/INR - Indian Rupee Weekly Chart
The Week Ahead:
Technical View:
Key Points:
• USD holding close to important trend line supports
• No major breakouts expected in the near future
The US dollar ended the session on Tuesday with losses of 0.35 percent, to settle at INR 62.2200. The pair has been oscillating in the INR 62.0000- 63.0000 range for the last 10 trading sessions, with signs of an imminent upside in the next few sessions. The near term view remains bullish in favor of the dollar although the gains could be very limited. Supports are firmly placed at Indian Rupee 61.7000- 62.0000; trend lines connecting the lows of May of last year and January of this year, where the downside is likely to be capped.
Near term resistances are pegged at INR 62.5000, close above which the gains are likely to extend to INR 63.7500- 64.0000; the top end of the near term bearish channel. The medium to long term view also remains bullish in favor of the US dollar with the USD/INR pair likely to target INR 65.0000- 67.0000, with the possibility of last year’s highs being breached a likely outcome. Trading range for the week: INR 61.7000- 64.0000.
Strategy:
Initiate long positions on the US dollar on price declines from INR 61.7000- 62.0000 and look to exit around INR 63.5000- 64.0000.
USD/INR Comparison With Major Indices (Click to englarge)
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