TODAY: Wednesday, 24^TH April, 2024

USD/INR:

Dollar remained subdued and risk appetite was heathy yesterday, as middle-eastern war concerns continued to dissipate. While the Dollar is fundamentally strong due to the rationalization of rate cut expectations, the safe-haven premium is now being shed and hence the stability in currencies over the past two days.

Dollar Index is at 105.60, with EUR at 1.0710, GBP at 1.2460 and JPY weak at 154.80. JPY remains vulnerable even as the Dollar has retreated from the recent highs, as markets continue to push the BOJ to its limits on intervention.  Equities in the US traded well in the green. The DOW rose 0.7% and S&P 500 jumped 1.2%, aided by rise in tech stocks. Asian equities have opened on a positive note. Indian equities ended flattish yesterday.

INR is back to being docile in its range, as the global geopolitical risks subside. Unless the core PCE throws an unexpected surprise and the Rupee is now back firmly in the range, at least until the next month’s macro data.

MAJOR WORLD CURRENCIES:

USD:

GBP:

The GBP/USD pair recovers to 1.2450 on Wednesday during the early Asian session. The downbeat US April PMI data and increasing appetite for the risk-linked space exert some selling pressure on the US Dollar. Later in the day, the US Durable Goods Orders and weekly Mortgage Applications will be released. 

From a technical perspective, the GBP/USD is still downward biased, as key resistance levels remain respected by price action. However, if the major achieves a daily close around the 1.2440 area, that will complete a ‘morning star’ candlestick chart pattern, suggesting the pair could aim higher.

In that event, the GBP/USD first resistance would be the 1.2500 psychological level. Once broken, further gains are seen, with the 200-day moving average (DMA) up next at 1.2565, ahead of 1.2600. Key resistance levels emerge at the 50-DMA at 1.2628 and the 100-DMA at 1.2649.

On the flip side, further losses are seen if the pair drops below 1.2400. A breach of the latter would pave the way to challenge the year-to-date (YTD) low of 1.2299.

EUR:

 EUR/USD holds above the 1.0700 psychological barrier during the early Asian session on Wednesday. The weaker-than-expected US PMI data for April drags the Greenback lower and creates a tailwind for the pair. Another retracement in the US Dollar (USD) prompted EUR/USD to resume its recovery and surpass the key barrier at 1.0700 the figure on turnaround Tuesday.

The data-driven sell-off in the Greenback followed discouraging advanced prints of US PMIs in March and came amidst further reassessment by investors of the potential timing of a Federal Reserve (Fed) rate cut, now expected to happen later than previously anticipated, potentially in September, though the possibility of a move in July has not been entirely dismissed.

The resurgence of bearish sentiment in the Greenback coincided with ongoing decline in US yields across various timeframes and a consistent narrative highlighting the divergence in monetary policy between the Fed and other G10 central banks, particularly the European Central Bank (ECB).

Against this backdrop, recent statements from Board members leaned towards the initiation of the bank's easing cycle in June, with speculation circulating about three interest rate cuts (or 75 basis points) for the rest of the year. Conversely, the Fed is projected to make its first interest rate reduction in September, although the likelihood of a similar move in July cannot be ruled out entirely.

Looking forward, the relatively subdued economic fundamentals in the Eurozone, coupled with the resilience of the US economy, reinforce expectations for a stronger Dollar in the medium term, especially considering the possibility that the ECB may begin rate cuts before the Fed. In such a scenario, EUR/USD is expected to undergo a more pronounced decline in the short term.

Gold

Gold price lacks follow-through buying and is influenced by a combination of diverging forces. Easing geopolitical tensions continue to undermine demand for the safe-haven precious metal. Tuesday’s dismal US PMIs weigh on the USD and lend support ahead of the key US macro data.

Despite the extended pullback in the US Dollar and the US Treasury bond yields on Tuesday, Gold price built on its corrective downside, as ebbing fears over a wider regional conflict in the Middle East dented the safe-haven appeal of Gold price.

Additionally, risk-rally on Wall Street indices, in anticipation of corporate earnings results from key US tech giants, also weighed on the traditional safety bet, Gold price. Even though the US Dollar wilted amid risk flows, the bright metal failed to capitalize and hit fresh two-week lows just below $2,300.

The US Dollar also bore the brunt of the upsurge in the Euro, fuelling by surprisingly robust European business activity data.

But the continued weakness in the US Treasury bond yields did lend some support to non-yielding Gold price, as the focus shifts toward the US fundamental news and the Fed rate cut expectations, with the Middle East geopolitical tensions taking a back seat.

So far this Wednesday, Gold pirce defends key technical support, as the US Dollar licks its wounds but a modest uptick in the US Treasury bond yields keeps Gold sellers hopeful. The risk-on market mood also remains a weight on both Gold price and the US Dollar. Asian traders react positively to Tesla Inc.’s results published after the US markets close.

Tesla’s stock price rose over 13% in post-market trading to $163.96 after billionaire founder, Elon Musk, highlighted that the production of the new, affordable EV models could be preponed. Traders shrugged off Tesla’s 9% YoY decline in its revenue for the March quarter.

All eyes now remain on the mid-tier US Durable Goods data due later on Wednesday for fresh trading incentives, as the main event risk this week remains the advance first-quarter US Gross Domestic Product (GDP) release, especially after Tuesday’s downbeat US Preliminary Composite PMI.

S&P Global said on Tuesday that its preliminary US Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 50.9 this month from 52.1 in March. Both Manufacturing and Services PMI fell short of market expectations in April, raising doubts over the US economic resilience. Therefore, the US GDP report will be closely scrutinized for any alterations to the market’s pricing of the Fed rate cut expectations this year.

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

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

 Cash/Tom:    0.10/0.75                  Cash/Spot: 0.20/1.50

 Tom/Spot:     0.10/0.75                  Spot/Next:  0.25/1.25

Cash Date:   24^th   April   2024

Tom Date:     25^th   April   2024

Spot Date:    26^th   April    2024

Outlook for the day 24^th April, 2024

Rupee expected to trade in range of 83.20-83.50

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

Foreign Currencies

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

Precious Metals

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

Stock Indices

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