INR update: Hard brexit chances reduce; HK unrest eases; US-China to talk again!

Taking a step back the main reason for a global risk off recently was US-China trade tensions and not Hong Kong civil unrest. Therefore the reaction to yesterday’s positive news on Hong Kong unrest seems to be overdone. US-China would be talking at a ministerial levels in the first week of October but the fact remains that the two sides are far apart to come to a common ground swiftly and Trump does not get any votes for solving the issue one year before elections. On the other hand China-Iran strategic tie up will result in some reaction from the US which could again spoil risk sentiments. The view on EURUSD remains a sell on the back of last week’s bearish close (below 1.1050) with a stop above a weekly close of 1.1144 for a target of 1.06.

GBPUSD is caught between Brexit news swings. No one can reasonably predict where its headed politically but fundamentally against the dollar cable looks weaker only. A weekly close below 1.1975 will indicate hard brexit expectations crystallizing and a weekly close above 1.23 would indicate that market is expecting that a hard brexit has been avoided.

USDINR rally from August beginning was on the back of a depreciating CNH plus local slowdown concerns. Since 1^st August USDINR has moved higher by 4% as compared to CNH at 2.5% now. Given the local factors it is difficult to say that INR losses is in excess. The view remains of USDINR going higher towards 72.50+ in the next week or so. A daily close below 71.78 will likely bring in 71.50 levels, therefore long USDINR here should be stopped if we are going into a close below 71.78. CMP 71.83, Range for the day 71.78-72.05.