Making Sense

USDINR is range bound and appears to be breaking out of the upside resistance of the wedge. Last three consecutive sessions have seen doji candlestick pattern clearly indicating indecision after the long rally. 60.80 is also the 78.60% fibonacci retracement of the upmove from 58.64 to 68.80. A clear break below 60.80 is needed for INR bullish momentum to sustain.  Till such time, one can look to buy on dips for an immediate target of 62.50 with stop below 60.80. A couple of other thoughts to share  - one of the exporter companies' CFO mentioned that at 68 levels on the usdinr his order book saw a jump in new orders and exports became cheaper compared to even the chinese. So my sense is that authorities are going to limit sharp rupee appreciation as that disrupts the natural macro adjustment.  - buying on account of accumulation of forex reserves by RBI (as can be seen in a sharp jump of USD 3.395 bn in forex reserves to USD 281.12bn mainly on ac...

If we look at the USDINR chart there is a falling wedge formation which is in more cases than not a bullish reversal signal. Wedge trend line support is at 61.00 and resistance is at 62.11. Though we traded up to 61.00 we saw a sharp reversal in yesterday’s move. A similar pattern is to be seen in EURINR chart. USDSGD is near crucial 1.2400 levels. Interestingly, the USDINR forwards chart is also indicating further upside (both annualized and absolute figures). We see a major support at 440 ps on the 1Y forwards. This is further corroborated by higher than expected inflation wpi and cpi inflation data.  USD 5Y swaps are at major support level of 1.50%. With UST's 5Y and 10Y trading at 1.42% and 2.69% respectively for the past few trading sessions. We may either break lower from here or see a reversal ... My sense is that we may see a reversal going ahead..We’ll have to be patient, let the factors play out and watch. So interesting times lay ahead... (Really short on ...

One needs to be watchful of the USDINR moves. After closing the week at 61.38 on Oct 4, it has made higher lows on 2 consecutive sessions and closed near 61.80 levels. A close above the Oct 4 high at 61.95 will signal a partial retracement of the down move atleast upto 62.50. Light positioning is preferred here till we get further clarity on the direction.

As part of calibrated withdrawal of extraordinary measures, RBI reduced the MSF rate by 50 bps to 9.00%   Provide additional liquidity through term repos of 7 days and 14 days for a notified amount equivalent to 0.25 per cent of NDTL of the banking system through variable rate auctions on every Friday beginning October 11, 2013. NDTL 76.17 Lac Crore Additional liquidity 19,000 Crore Recent liquidity infusion through OMO 9,974 Crore This will have the effect of bringing the short term rates lower and steepening of interest rate curve . RBI is drawing comfort from current levels on the USDINR (@ 61.80 on close of 08th October 2013) and external situation (US Govt shutdown, downside risks to growth and delay in tapering). In less than 2 weeks, RBI has reduced MSF rate by 125 bps which means it is looking to gradually unwind money market measures (relaxing the cap on allocation of funds through LAF @ 0.50% of NDTL and daily maintenance of CRR) and close the swap windo...

USDINR weekly close at 61.38 after being boxed in a 61.80 - 62.90 range for a good 9-10 trading sessions is bearish for USDINR. A double top formation on the daily chart indicates an immediate downside target for the pair at 60.70. Monthly, weekly and daily charts indicate further bearishness on the rupee. One can go short with stop loss above 62.00.

If you are an NRI then you just got richer !!!! When the Ryan Gosling (Raghuram Rajan) of Indian politics took centre stage as RBI governor he announced a scheme that made richer NRIs even richer and quenched the domestic USD demand temporarily. RBI has been liberalizing regulations around FCNR deposits to shore up USD flows which are more stable in nature. It first increased the FCNR rates from L+300bps to L+400 bps. Second, removed CRR and SLR requirements on FCNR and NRE deposits and third, opened a USD to INR swap window on fresh FCNR  funds mobilised (with minimum maturity of 3 years) with RBI @ 3.50%. With this came the introduction of the leveraged product . Explained as below: Mr. A (HN-NRI)       Deposits as security USD 1.00 mio with offshore branch of bank A for the purpose of availing FCY loan Bank A                       Keeping this deposit of USD 1.00 mio , lends to Mr. A US...