August USDINR closed at 55.46, down 3 paise. Spot USDINR closed at 55.34 from 55.27 and traded the range of 55.18-55.47. USDINR opened weak with market chatter about inflows from a power company at the session start. But soon regained upward momentum as oil companies dollar demand rose. USDINR though retraced lower from session following a suprise decline in US dollar against euro.
Overseas, US dollar declined against the majors, euro in particular, despite a host of negative news prints from Eurozone. Part of this decline was attributed to short covering triggered by similar move in euro crosses particularly against the Swedish Kroner and Norwegian Kroner.
Early Asian session saw a weaker 2Q GDP print for Japan and data internals showed a decline in domestic consumption. Various press reports from Euro area showed increased opposition from the German political quarters towards Greece's current pace austerity program implementation. Meanwhile the Hellenic nation continued struggle to generate growth amidst sharp austerity measures remained under focus as the GDP in second quarter contracted by 6.20% which while lower than 6.50% in previous quarter, still strengthened the views that the overall GDP growth could fall by 7%.
Italy too remained under focus with its public debt reaching a record high at 1.973 trillion euros vs 1.966 trillion euros previous. Italy's FinMin Grilli said that the country was likely to miss the fiscal goals, but did not plan to implement more budget cuts and did not require aid as well. Italy meanwhile raised 8 billion euros in auctions for 12 month bills with average yield at 2.76% vs 2.69% previous. Germany on other hand raised 3.77 billion euros in 6 month bulbils at -0.499% vs -0.0344%. There were reports that the German constitutional court had set Sept 13 for ruling on the legality of ESM and fiscal compact. Meanwhile LCH Clearnet raised margins for some of the Spanish and Italian government debt.
Separately data showed that the ECB remained on the sidelines for 22nd consecutive week with respect to buying sovereign bonds under SMP.
EURUSD: Closed at 1.2329 from 1.2286 and traded in 1.2260-1.2372 range.
GBPUSD: Closed at 1.5677 from 1.5684 and traded the range of 1.5656-1.5716.
USDJPY: Closed at 78.28 from 78.23 and traded in 78.15-78.36 range.
Spot USDINR has opened at 55.54 from 55.34 Monday and was trading at 55.51. USDINR could trade in 55.00-55.60 range. USDINR at session start has opened firm ignoring the marginal decline in US dollar against euro in early Asian trade. At the session start , a little direction is likely form domestic equity indices, which are seen choppy, ahead July inflation data. An NW18 poll has pegged July inflation at 7.39% vs 7.25%. With inflation rates for primary articles and fuel and power in double digits, the overall inflation rate has remained above 7% for past 5 months.
Overseas, despite a string of negative news flows from Eurozone, risk on sentiment seems to prevail and has propped up euro against the dollar. Today's session remains data heavy, with French, UK and Spanish July CPI , German 2Q GDP and Aug ZEW index, EZ 2Q GDP and industrial production in June. On US front, July PPI, advance retail sales and June inventories are due later.
On domestic front, USDINR could get support in the event that the July inflation data release is at higher than market expectations. This is likely to further weaken expectations of rate cut from the central bank at its Sept, even possibly its Oct meet. Comments from various top officials in the RBI suggest, that the central bank is now clearly more focused to contain inflation, which it fears may spike up further in the backdrop of a weak monsoon. It expects government to set up on economic recovery measures and improve clarity on its policies.
Technical Trades Outlook:
USDINR: Support at 54.70, 54.10 Resistances at 55.75, 56.20
Price is witnessing a strong resistance on upside at 55.60-55.75 levels, only a break above which would push prices higher.
On other hand, failure to hold above the support of 54.70 would drift prices lower towards 54.10 levels.
EURINR: Support at 67.60, 67.10 Resistances at 68.40, 68.80
GBPINR: Support at 86.30, 85.60 Resistances at 87.10, 87.50
JPYINR: Support at 70.00, 69.50 Resistances at 71.00, 71.50, 72.00
EURUSD: Support at 1.220, 1.2130 Resistances at 1.240, 1.250
Price is likely to rebound and trade higher towards 1.240 levels.
USDJPY: Support at 78.00, 77.50 Resistances at 78.80, 79.20
Price needs to sustain above 78.80 levels to gain strength and trade higher. 78.00 would act as strong support on declines.
GBPUSD: Support at 1.560, 1.5550 Resistances at 1.5720, 1.5780