August USDINR closed at 55.90 , up 7 paise. Spot USDINR closed at 55.76 from 55.65 and traded the range of 55.71-56.03. USDINR had a strong start opening at the psychological 56.00 mark, mostly noting US dollar's gains against other majors Wednesday. Domestic currency markets were closed Wednesday and chatter about a queue of bunched up orders from oil companies for dollar purchases too supported USDINR initially. But as the session progressed, USDINR retraced some of its initial gains with market taking note of a gradual decline in USD against euro. Besides this there was a chatter about inflows towards the external borrowing by a company as well as dollar sales to the tune of around 200 million by an IT company. Separately, RBI Dy. Gov. Gokarn said that it was too early to make a monetary policy adjustment based only on July inflation data (which fell to a two and a half year low). He reiterated the central bank's concerns about the rise in core inflation, which has moved from 5% or below to 5.4%. He also added that the fall seen in the latest inflation print may not be representing a trend, and that the direction of inflation internals such as fuel and food prices will be key determinants to be eyed.
Meanwhile media reports said that the government worried about a possible downgrade for sovereign ratings in the backdrop of burgeoning fiscal deficit was likely to announce a hike in diesel price by 5 rupees/liter.
EURUSD: Closed at 1.2352 from 1.2287 and traded in 1.2255-1.2372 range. Closed above the 20-day EMA at 1.2315 but continued to struggle to go past 50-day EMA at 1.2399. The 17-nation currency got a boost heading into US session, with various positive rumors about Spain flying about. Some reports suggested that Spain could request EFSF to use the remainder of the 100 billion euros for supporting sovereign yields after the bank recap program was completed as this would require only 60 billion euros. There were reports that suggested that the officials in Europe were preparing for a big support for Spanish yields as soon as the country requested for help officially. On US front, weekly jobless claims (366,000 vs. 364k, expected 365k) had little surprise to offer. July Building permits (812k vs. 760k, expected 770k) were stronger but actual starting of house constructions as indicated by housing starts (746k vs. 754k , expected 757k) was weaker. Aug Philly Fed Business Index at -7.1 vs. -12.9, was higher than forecasts at -5.0 and after yesterday's sharply lower Empire state index, continued to underscore the weaker growth in manufacturing.
GBPUSD: Closed at 1.5730 from 1.5677 and traded the range of 1.5635-1.5744. Pound sterling maintained its upward trend against the US dollar, since the start of Aug. Comments from BoE's Kings about the futility of a further rate cut in near future have strengthen the unit against the US dollar. Meanwhile Thursday, market remained focused on July retail sales which includes auto fuel which rose +0.3% m/m v -0.1% expected; 2.8% y/y v 1.4% expected. Excluding fuel costs m/m sales registered 0.0% growth v -0.2% f/c; 3.3% y/y v 2.0% f/c.
USDJPY: Closed at 79.31 from 78.96 and traded in 78..90-79.39 range. Trading range remained tight even as the participants returned after Obon holidays. Constant official chatter about strong yen hurting economy has prevented a slide in the pair. Market Outlook:
Spot USDINR has opened at 55.70 from 55.76 and was trading at 55.68. Likely trading range for USDINR seen between 55.30-55.80. Early Asian session US dollar gains have restricted a slide in USDINR. With a long weekend ahead as domestic markets remain closed Monday, likely that the market participants could trim long dollar positions. Besides this USDINR could weaken as media reports point to likely government action on containing fuel subsidies. As per reports, the government fearing a sovereign ratings downgrade, following its inaction to trim fuel subsidies among other could hike the politically sensitive diesel prices by as much as 5 rupees/liter after the monsoon session of parliament ends on Sept 7. Besides this there are also reports that the government could clear FDI proposals worth 30 billion rupees during next week, which seen negative for US dollar vs. rupee.
On overseas front, with a rather light session ahead on economic data releases front, likely that participants could focus more on some positive market chatter on Spanish front and this could weigh on US dollar. Varying reports suggest that the officials in EZ are lining up with major program to support Spain's sovereign yield if the country officially requested financial support from bailout funds. Also there has been chatter that Spain might have requested EFSF to use the remaining 40 billion euros out of 100 billion euros aid under bank recap aid, for actually supporting sovereign yields, as the requirement for bank recapitalization was seen only for around 60 billion euros. There was however no official confirmation of the same.
Technical Trades Outlook:
USDINR: Support at 55.50, 55.00 Resistances at 56.20, 56.50 Price need to break above the resistance of 56.20 levels in order to rally further, 55.50 remains support for the day.
EURINR: Support at 68.50, 68.00 Resistances at 69.00, 69.50 A sustained move above 69.00 would push prices higher towards 69.50 levels. 68.50 would act as a support on declines.
GBPINR: Support at 87.00, 86.30 Resistances at 87.90, 88.50 Price is likely to trade sideways in the range of 87.00-87.90 for the day.
JPYINR: Support at 70.00, 69.50 Resistances at 71.00, 71.50 Price decline below the support of 70.00 would lead to breakdown, which would drift prices lower towards 69.50-69.00 levels.
EURUSD: Support at 1.220, 1.2130 Resistances at 1.240, 1.250 On upside, 1.240 remains a key resistance. Only a price move above which would lead to further rally.
USDJPY: Support at 78.90, 78.80 Resistances at 79.50, 79.80 Price is likely to trade sideways in the range of 78.90-79.50 for the day. After a 3 day rally, price is likely to witness a pullback or consolidation.
GBPUSD: Support at 1.560, 1.5550 Resistances at 1.5720, 1.5780 Price need to sustain above 1.5720 levels, to rally further towards 1.580 levels.