Rupee Opened Marginally Lower After March Trade Deficit Widens Sequentially

Rupee Opened Marginally Lower After March Trade Deficit Widens Sequentially

16 Apr 2019   9:14 AM
 

USD/INR – The Indian rupee opened little changed against the dollar after trade deficit in Asia’s third-largest economy widened more than expected in March. The rupee opened at 69.49 versus its previous close of 69.42. More than the trade deficit, what will be worrisome for the rupee bulls is that the pair threatens to move above its immediate range. Late Monday, data showed that India’s trade deficit widened to $10.9 billion last month from a one-and-a-half year low of $9.6 billion in February. The March trade deficit was wider than $9.7 billion forecast by economists. In March of last year, the deficit was at $13.7 billion. Exports growth improved to 11% on-year in March from 2.4% in February, while imports edged up 1.4%.

EUR/USD – Recent gains off early April lows in EUR/USD would hint at gaining momentum for further gains in the pair. EUR/USD is up slightly from its Asia open by 1.1300 and is flirting with daily cloud base resistance by 1.1308. However, even as the euro has rallied off April 2's low by 1.1183, just above March 7's 1.1176 low, IMM spec short positioning grows. Despite the Fed's patient tack on rates in 2019, which would generally be seen as a dollar negative, EUR/USD has fallen from its high at 1.1570 as ECB growth and inflation rhetoric is tipped to the downside, where the Fed though patient has not yet given up, nor is it likely to give up in the near-term, on its outlook for a hike in 2019, despite the markets view of cuts in 2019 and 2020. EUR/USD short positioning is now at highs not seen since December 2016. The large EUR/USD short position, amid a steady Fed view, would generally be seen as a breeding ground EUR/USD gains as stretched shorts cover amid steady U.S.-euro zone rate differentials. However the Fed's unwillingness to accept the dour market view, and other morose views of central banks, should cap EUR/USD gains by its 200-DMA at 1.1446 and 2019 high at 1.1570. EUR/USD was last trading at 1.1305.

GBP/USD – GBP/USD has been capped by the 21 DMA and trendline from the March 1.3380 high, which comes in at 1.3114/18 today. A close above 1.3120 would target 1.3226, 61.8 percent of the March fall. The 1.2973 200 DMA, which was a base in April and on the close in March, is pivotal support.  After months of dominating headlines, the slow-motion car crash that is Brexit has slipped into the background. The UK parliament is on Easter break until April 23, so the USD and UK data will lead sterling in the meantime. When parliament returns, little is likely to have changed. PM May will again seek to break the deadlock and continue negotiations with the Labour opposition. This leaves the chances of an adjusted deal, a major renegotiation with the EU, second referendum or a snap election still on the table. If the UK cannot find a compromise by Oct 31, a no-deal Brexit will be triggered. The uncertainty that has caused many to shun GBP risk will continue until Brexit is resolved. UK business investment and the economy will remain under pressure until a deal is agreed. GBP/USD was last trading at 1.3095.

USD/JPY - A rally in global markets has lowered demand for the safe-haven yen. On Friday, EUR/JPY saw the biggest daily rise since February 1. That seems to be setting USD/JPY's up for further big gains, especially as Japanese importers and investors are said to the better buyers on dips. However, speculators remain fairly long USD/JPY and they're helping to limit even bigger gains in the pair along with the large offers from Japanese exporters. For the week ending April 9, the futures market USD/JPY net long was an equivalent cash position of $8.04 billion -- the biggest since the week ending January 1, while EBS flow data since April 9 shows that even more USD/JPY longs may have been established. Those long USD/JPY need to force a daily close over the key 112.08 Fibonacci level, a 76.4 percent retracement of the October 2018-January 2019 drop from 114.55 to 104.10, in order to set up a retest of the 112.60, 112.67 and 112.86 December 2018 highs and diminish the downside threat.  USD/JPY was last trading at 111.98.

Currency range for today

Currency Lower Upper
USD/INR 69.20 69.70
EUR/INR

78.00

78.80
GBP/INR 90.55 91.35
JPY/INR 0.6175 0.6235
 
Important data releases today
 
Time Currency Event Forecast Previous
2.00 PM GBP  Average Earnings Index +Bonus)  3.5%

3.4%

2.00 PM GBP Claimant Count Change (Mar) 20.0K 27.0K
2.30 PM EUR

German ZEW Economic Sentiment (Apr)

0.8 -3.6