ICICI Direct expects USDINR to find support at lower levels. Utilise downsides in the pair to initiate long positions.

ICICI Direct’s currency report on USDINR

Spot Currency

The rupee witnessed huge losses of over 1.6% in line with EM currencies spooked by depreciation in the Chinese Yuan. It is expected to open further lower today while a move in the CNY would be keenly tracked • The US dollar ended lower against major currencies while the focus in the last couple of sessions remained on EM currencies. The Chinese Yuan is trading at 7.05, the lowest levels since March 2008. The US President’s decision to initiate tariffs of 10% on $300 billion of Chinese imports virtually covers the whole of China shipments to the US. The CNY is likely to see some more losses as a slowdown in economic growth is also weighing on the currency.

Benchmark yield

Sovereign bond yields rose to 6.39% tracking escalation in US-China trade war as well as concerns over domestic geopolitical developments. However, a sharp cool-off in global yields as well as crude oil prices could cap a decline in domestic debt • US 10-year yields fell further to 1.71%, lowest since October 2016. Yields are on a downward spiral tracking increased concerns as the US President continued to target Chinese imports into the US.

Currency futures on NSE

The dollar-rupee August contract on the NSE was at 70.85 in the previous session. Open interest increased 35.88% in the previous session • We expect the US$INR to find support at lower levels. Utilise downsides in the pair to initiate long positions.

Intra-day strategy 

US$INR August futures contract (NSE) View: Bullish on US$INR
Buy US$ in the range of 70.88 -70.92 Market Lot: US$1000
Target: 71.20 / 71.30 Stop Loss: 70.72
Support Resistance
S1/ S2: 70.95 / 70.80 R1/R2:71.25 / 71.40

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