USDINR Weekly Outlook

Brace up for election euphoria

"Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria."

- Sir John Templeton

Trade Recommendation

O Buy USDINR on Monday if the candle opens above 61.069 Target 61.50-61.80 stop loss 60.80

O Sell USDINR limit 60.70 Target 59.50 stop loss 61.10

Key events

Event Expected outcome Impact on USDINR

US GDP 2.1% annualized year over year

Upward revision of GDP would strengthen US Dollar

US Policy makers speak on monetary policy

Markets will watch out for comments on possible interest rate hike in 2015

US Dollar to strengthen if policymakers support interest rate hikes in 2015

Surprise Element – US policy makers squash expectations of interest rate hike in 2015 will see INR appreciating against the US Dollar to 60.30 levels and below

Weekly Chart

Lowest monthly closing since Aug 2013 ?

Technical DevelopmentsO Weekly Chart

O Last week’s closing is at 50% retracement level (61.06) of 2013 USD/INR high-low

O From weekly chart, range for this week is likely to be 60.80 to 61.50

O Monthly ChartO USDINR may end up at its lowest level on 28th March

2014. Multiple monthly candles since September 2013 have tested 60.80-61.00 levels, although the monthly closing levels were consistently above 61.80 levels each time.

O USDINR may rise sharply in next month if the march month candle rebounds to end above 61.80 levels on 28th March

O ConclusionO USDINR to test 61.50 – 61.80 levels if the candle opens

above 61.05 on MondayO 61.80 to provide strong support this week

Macro Developments

Domestic frontO Rupee and domestic equity markets would continue to be

resilient amid global uncertainty on possibility of BJP win in upcoming elections

O Euphoric moves are likely to be sharp in favor of Rupee, hence it is advisable to square of loss making long USDINR positions

O Reserve Bank of India is likely to defend 60.00 levels by buying up US Dollars

O The sharp euphoric rallies in rupee provide opportunity to shore up dollar reserves

O ConclusionO Modi hype will dominate fundamentals and shall keep lid

on rupee weakness

Macro DevelopmentsGlobal front

O US Federal Reserve announced Taper of $10 billion which was largely in line with market expectation

O Possibility of interest rate hike in 2015 came as surprise which pushed USDINR to 61.30 levels on Thursday

O Gains were erased as markets doubt interest rate hike in 2015O Host of fed policymakers speaking this week may come out in support

of interest rate hike which will push up USDINR

Inter market relationshipsO Rupee is directly correlated to EUR. Given that there is a high

possibility of EURUSD appears due for correction, INR may declineO However the direct correlation between INR and EUR appears weak off

late whenever EUR fallsO On the other hand, correlation remains strong whenever EUR risesO Hence falling EUR may not lead to sharp fall in INR. Moreover losses in

INR appear capped around 61.50-61.80 levels

ConclusionO Do not carry long USDINR positions for April. Wait to see USDINR

March month closingO Sell USDINR around 61.50-61.80 levels and below 60.80 levels