US core and headline CPI came in line with expectations leaving the yield curve where it was and with it the dollar. News reports suggests that China and US have shown intent for engaging in talks again to resolve their trade tensions. Fed speakers in general seem to be mildly concerned about trade war but at the same time do not want the market to unwind two more rate hikes from the curve. A weekly close in USDJPY below 112 would signal a reversal or else the target remains 113.26 (200wma). Similarly on the dollar index 95.19 (200 wma) looks like a good resistance now (CMP 94.87).
USDINR moved towards the lower end of the range of 68.30-69.10 with declining oil prices and higher equities. USDCNH looks toppish near 6.7 (CMP 6.685) and a move lower in USDCNH would make INR appreciate sharply as well. The news of US and China engaging in talks again along with Trump’s longer deadline of 30th August on next round of tariffs makes me think that 6.60 to USDCNH is more likely than 6.75, therefore now 68 could come sooner than 68.50 on USDINR. A daily close below 68.30 on USDINR can create a sharp down move towards 67.50 levels. A daily closing today above 68.40 would put the pair back in the broader range. With oil coming lower, India 10Y gsec yield below 6.8%, USDINR 1m NDF trading flat the likelihood for 69+ levels in the near term looks low. Important weekly close for USDINR today, CMP 68.34, Range 68.20-68.40.
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