TODAY: Wednesday, 24^th July, 2024

USD/INR:

Dollar is stable, but JPY managed a rebound yesterday. US yields continue to indicate a cut coming in September.  Dollar Index is at 1024.25, with EUR at 1.0890, GBP at 1.2930 and JPY at 156.75. US tech rebound yesterday buoyed up markets, and the DOW managed a 0.3% rise, with the S&P jumping by around 1%+. Indian indices also managed a green close after the sharp correction on Friday.

With no real macro triggers at play until the PCE inflation at the end of this week, the base case scenario of sideways Dollar is likely to play out for the coming few days. US presidential election is increasingly becoming important for the market, after the withdrawal of Joe Biden from the presidential nomination, and uncertainty of who will be the Democratic nominee. As for the Rupee, for now, it seems to have found a mildly higher range and is still biased towards slight depreciation given that the long-standing levels are broken. But the global environment is benign enough to keep INR from a runaway move. CNY stability remains key to the Rupee move now.

MAJOR WORLD CURRENCIES:

The GBP/USD pair drifts lower for the second successive day – also marking the fourth day of a negative move in the previous five – and drops to a nearly two-week low during the Asian session on Wednesday. Spot prices currently trade just below the 1.2900 mark, down 0.15% for the day amid a modest US Dollar (USD), though any meaningful depreciating move seems elusive. 

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, climbed to a two-week high amid an uptick in the US Treasury bond yields. Apart from this, a softer risk tone further benefits the safe-haven buck, though bets for an imminent start of the Federal Reserve's (Fed) rate-cutting cycle in September cap gains. Apart from this, diminishing odds of an August rate cut by the Bank of England (BoE) should act as a tailwind for the British Pound (GBP) and the GBP/USD pair ahead of flash PMIs.

From a technical perspective, spot prices currently trade just above the 38.2% Fibonacci retracement level of the recent rally from the June monthly swing low. The said support is pegged near the 1.2880 region, below which a fresh bout of selling could drag the GBP/USD pair to the 1.2830-1.2835 area, or the 50% Fibo. level. The next relevant support is seen near the 1.2800 mark ahead of the 61.8% Fibo. level, around the 1.2780-1.2775 region. A convincing break below will be seen as a fresh trigger for bears and pave the way for deeper losses. 

On the flip side, any positive beyond the 1.2900 mark is likely to attract fresh buyers and remain capped near the 1.2930-1.2940 resistance or the 23.6% Fibo. level support breakpoint. Some follow-through buying will suggest that the recent corrective slide has run its course and shift the bias back in favor of bulls. Given that oscillators on the daily chart are still holding in positive territory, the GBP/USD pair might then aim back to reclaim the 1.3000 psychological mark and retest the 1.3045 region, or the one-year peak touched last week.

EUR/USD:

EUR/USD dipped one-third of one percent on Tuesday as investors knuckle down for the wait to a double-header of Purchasing Managers Index (PMI) figures due from both the EU and the US on Wednesday.

Pan-EU PMI figures will kick things off during the early European market session on Wednesday, and markets anticipate a slight uptick in EU Services PMI figures to 53.0 in July after June’s 52.8.

In the US, the Services PMI for July is anticipated to ease slightly to 54.4 from June's 55.3. Global markets are widely anticipating a rate cut from the Federal Reserve (Fed) in September, and investors are closely monitoring US economic indicators for further signs of softening to affirm the rate outlook. Rate traders are currently pricing in nearly 100% odds of at least a quarter-point rate cut from the Federal Open Market Committee (FOMC) during the September 18 rate call.

As the week progresses, the quarterly US Gross Domestic Product figures are scheduled for Thursday, and the US Personal Consumption Expenditure Price Index (PCE) inflation is on the agenda for Friday. It is forecasted that the annualized Q2 US GDP will rise to 1.9% from 1.4%, and Core PCE inflation on Friday is expected to further decrease to 2.5% year-over-year for the year ended in June, compared to the previous month's 2.6%.

Gold

Gold price builds on the overnight recovery from the vicinity of over a one-week low and attracts follow-through buyers for the second successive day on Wednesday. The uptick is sponsored by a weaker risk tone and lifts the precious metal to a fresh weekly top, around the $2,415 region.

The US Dollar clings to recovery gains, as risk-aversion remains the underlying theme early Wednesday, with Asian stocks under pressure following the big US tech earnings disappointment. After the US market closed on Tuesday, traders saw an unimpressive start to the earnings reports from the “Magnificent Seven” megacap technology companies.

Although Google parent Alphabet delivered a beat on both the top and bottom lines, the company’s chief signaled patience will be needed to see concrete results from artificial intelligence investments. Meanwhile, Tesla fell as much as 7% after profit fell short of estimates and the electric-vehicle giant delayed its Robotaxi event to October.

Additionally, traders also remain wary over mounting China’s economic slowdown worries, supporting the haven demand for the Greenback.

On Tuesday, the US Dollar found its feet and staged a decent comeback, mainly driven by the market’s anxiety ahead of the key US corporate earnings report. The US Treasury bond yields also rebounded firmly, notwithstanding the cautious market environment. 

Investors resorted to profit-taking on their USD shorts, as the economic calendar gets heated up from Wednesday. Global preliminary Manufacturing and Services PMI data will likely highlight the health of the economies, especially that of the Eurozone and the US, having a significant bearing on risk sentiment.

Weak PMI data could revive recessionary fears, putting a fresh bid under the safe-haven US Dollar. However, the non-yielding Gold price could also benefit from such a scenario, as US ‘hard-land’ fears could reinforce dovish Federal Reserve (Fed) expectations.

Markets are currently pricing in a September rate cut, as futures show a 97% chance, according to the CME Group’s FedWatch Tool.

USD/INR Cash/Tom/Spot Levels: (in Paisa)

(Updated as on 24^th July 2024, @ 09.00am)

 Cash/Tom: 0.05/0.70                   Cash/Spot:0.10/1.40

 Tom/Spot:  0.05/0.70                    Spot/Next: 0.15/2.10

Cash Date:  24.07.2024

Tom Date:   25.07.2024

Spot Date:  26.07.2024

Outlook for the day 24^th July, 2024

Rupee expected to trade in range of 83.58-83.73

MAJOR WORLD CURRENCIES: as on (23^rd July, 2024)

Foreign Currencies

Updated: 17:30 hrs. (12:00 GMT) on 23^rd July , 2024

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 23^rd  July , 2024

Stock Indices

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