Indian rupee tumbled down sharply to headed negative note on second month of the second quarter of the year of 2015 and shrink down around further 0.6% in the month of May against the month of April. However, the unit depreciated slightly during the first week of the month ahead of the weaker Industrial production, Wholesale price Index Inflation.
Industrial production (IIP) in March is likely to grow 0.2 percent month-on-month, delivering a 3.8 percent year-on-year growth, marking the third month in IIP acceleration and industrial slowdown is so acute and both consumer durable and consumer non durable are reeling under pressure.
While Inflationary numbers remain for April fell to a new low of -2.65 percent, the sixth successive month of deflating price number actually has vindicated the call on deflationary trends. It requires some radical action.
While it will give no clarity on June policy because of food inflation, the effects of which will be felt most likely in May. However It seems to be 25 basis points rate cut on the cards, which will depend on two things - how the food inflation will play out and how monsoon will shape up The US Federal Reserve is likely to stick with plans to raise interest rates later this year, with progress towards its employment and inflation goals helping allay concerns over the economy's recent weakness, current and former Fed officials say.
Fed Chair Janet Yellen Indicated some economic prospects during the month of May which was remained to acknowledge the recent sluggishness, including near stagnant performance in the first few months of the year. But she likely to repeat the mantra that better days should follow a temporary swoon, and highlight the economy's steady job growth, keeping the Fed on track for its first policy tightening in nearly a decade. While policymakers do not need much more evidence that the economy can withstand a modest initial rate rise by September, long seen as a reasonable time to act. While further not expecting a significant disruption on the employment side, and inflation looks like it's pretty well contained for a while despite the first-quarter slowdown.
Technical Outlook
The USDINR ended higher at 64.20 during the May month 2015 Up 0.6% as against 63.80 in the previous month. The pair may find Major trend reversal support near 62.70 to 62.45 levels, as indicated by the upward green arrow point while immediate supper seen at the level of 63.25 followed to 62.85. Simple moving average of 14 and 21 days in daily chart indicates subdued to upside level of 63.80 to 63.50 in the above chart. If INR sustains Above 63.90 levels that is above the moving average level may move drag rupee towards 64.50 followed by 65.00 as finding resistance to upward red Fibonacci resistance line.
In the near term resistance may be seen at INR 64.80 which is 61.8% retracement level of the Fibonacci as indicated in the above chart. 64.65 per dollar may be major resistance break out level while next resistance is likely to be seen at 65.0 per Dollar. As per technical chart, USDINR is still on upward direction slightly as Indicated by Moving average of Conversion and Diversion (MACD) to move towards the level of 64.50 to 65.00 per dollar with a further expected trading range of 64.85 to 62.50 per. While any close above the level of 65.0 per Dollar may drag to 67.20 level per Dollar.
While Among technical indicators, like MACD and Moving Average which may see Dollar trading in the sideways to up above the level of 63.00 -62.50. While on higher side 64.50 to 65.0 levels which in turn may be a selling opportunity in short term. Overall, near term scenario looks subdued between 64.80 to 62.90 levels per dollar and it is advisable to adopt swing trading strategy likely to be buy in dips around the level of 63.10 to 62.70 and sell on rise strategy in USDINR around the level of 64.80 – 65.0 with stop loss of 65.40 and expect corrections till 62.85-62.50 levels while selling could be initiated at indicated by down side arrow on higher side of the chart which is 67.20 per Dollar.
Contrary to above view, any weekly close above INR 65.0 could change the trend with major upward bias that could push the pair towards INR 66.25 to 67.50 levels. As such major down side fall not be expecting below the level of 62.50 followed by 62.10 per Dollar.
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