As discussed in an
earlier blog, US capital markets have literally dictated US FED
to a more dovish path. As recent, FOMC minutes showed that majority of FED
officials are now willing to remain patient about future rate hikes amid decline
in 10 yields and equity markets. US 10 year bond yield is trading near 2.69%
levels just 19 bps above FED fund target rates.
As shown in the chart above, rate
hike probability in 2019 is just 11%. Clearly, currently market is expecting a
long pause by US FED. Consequently, US dollar index, as shown in chart below,
has broken down crucial support 95.60 levels and now trading near 95.00 handle.
The US dollar index has immediate support near 94.72 levels, which is 76.40%
retracement of the move from 93.80 to 97.60. It is note-worthy that this
weakness in dollar is despite lack-luster data from Euro-Zone and continued uncertainty
in UK. Hence, unfortunately, markets are pricing which economy is likely to
face more hand-winds than otherL.
The Indian rupee has its
own-share of vulnerability in volatile crude oil prices. USDINR has spiked to
70.40-60 range as crude spiked above 60 handle and outflow related pressure.
Crude prices have significant resistance near 61.80-62.30 range.
Amid this back-drop, there is an
opportunity to sell USD/INR on upticks near 70.45-60 range with stop above
70.70-70.75 range and target of 69.80 levels.
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