INR update: US-China trade deal done, Brexit ambiguity over, markets celebrate

It has been an eventful morning. US announced that a Phase 1 trade deal has been agreed to with China. Consequently USDCNH is trading at 6.96 as compared to 7.025 yesterday. China is still to announce the same and USDCNY fix at 7.0156 still prices in some amount of caution. A USDCNY fix next week below 6.98 would be a Chinese confirmation on the in principle agreement with US. Technically USDCNY fix moving below 6.98 calls for at least another 1% appreciation towards 6.92.

With the conservatives likely to win a clear majority in UK elections the uncertainty around Brexit seems to be reducing leading to a relief rally in GBPUSD. GBPUSD seems poised for 1.37 today (CMP 1.3460). driven by positional short covering.

A weekly close in USD index (CMP 96.77)  below 96.00 (200 WMA) would likely bring in 94.5 levels and therefore seems unlikely (prices stay in range more often!). On the other hand if EURUSD closes above 1.1150 today, then it would be significantly bullish for the pair with a target of 1.1357.

Price action yesterday suggested that the inflow is done with. Price action yesterday afternoon also suggested some large buying driving the pair higher from 71.60 to 71.85 perhaps driven by nationalized banks. There doesn’t seem to be any likely bullet inflows in the pipeline for the next 1 month in USDINR.

USDINR will be driven by USDCNH for the next few session post which local macros should start dominating. 70.30 is 200 WMA for USDINR and a weekly close below the same would be significantly bullish for the Rupee and therefore unlikely. For import 70.30-70.50 is a buy zone from a 1-2 month hedge perspective. For the day CMP 70.61, Range 70.35-70.70.