Trade tensions have materialized since the last ECB meeting on 14th June 2018. Although EU data negative surprise improved but it continues to be in the negative territory and gradually it is becoming clearer that the EU economic activity is not comparable to the US. Given this backdrop it is likely that the ECB stays dovish in the monetary policy meeting tomorrow driving EURUSD lower. Before shorting EURUSD I would wait for the Juncker-Trump conference outcome today, as that could be a joker in the pack.
USDINR has clearly not being allowed to sustain above 69. USDINR 1m NDF is trading 1p left. The risk of USDCNH moving towards 6.85 remains but with each failed impact on INR, the rupee’s resistance to CNH depreciation increases. But in case Euro depreciates to 1.1550 levels again then the risk of 69+ levels (although temporarily only) increases. Brent trades near 74 levels while India 10Y is stable t 7.8%. Medium term range is 69.10-68.30 with a possibility of a blip to 69.25 levels this week in case Euro moves lower. CMP 68.86, Range 68.80-69.00.
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