Ever since coronavirus started spreading rapidly, the market focus was either on the number of cases increasing or on the stimulus packages from the governments and the central banks. But from the month of July, the trend in spot has been very indecisive on lack of fresh triggers. The currency market has remained range-bound, seesawing in between 74.50-75.50.
However, now the spotlight has come back on the lingering US-China trade war. The officials of both the nations are scheduled to talk on Aug 15 to review progress on the implementation of the phase-one trade deal. Since the outbreak of the COVID-19 pandemic, Trump has been blaming China to hit the US with coronavirus plague. The bigger question for all asset classes is with US elections around the corner (Nov 3), whether the recent aggressive tone of Trump against China will jeopardize the trade talks. The market will also be looking closely for any Chinese retaliation.
Along with the US-China trade war, the prospective Reliance-Aramco deal may too have an impact on the spot. However, ahead of the scheduled trade talk, we may not observe a significant position building in USD/INR spot and it will continue to trade within 74.50-75.50. The USD/INR 1-month ATM Volatility has dropped to 5.3% from 5.77% as on Aug 3, indicating that traders are preferring to remain on sidelines. Also, USDINR PCR (Put/Call ratio) has fallen to 0.80% from 0.85% seen last week.
Technically, as seen in the daily chart, USDINR Spot is hovering around the Bollinger band’s medium level. On the upside, immediate resistance lies at 75.0 and key resistance is observed at 75.15/75.20 which is a crucial 38.2% Fibonacci Retracement level as well as Bollinger band’s upper level from where a reversal is expected. Adding to this, 50 days simple moving average also stood around 75.20 mark. On the downside, support is located at 74.85-74.70, and 74.50 will continue to act as crucial support. However, if the pair consistently trades above 75.20 then only 75.40 can be expected.