Weekly Outlook 12th October to 16th October, 2020

Weekly Outlook 12th October to 16th October, 2020

11 Oct 2020 11:25 AM

Weekly Outlook 12th October to 16th October, 2020

USDINR: On the economic event front, CPI figures are expected on Monday along with WPI Inflation on Wednesday, for the month of September. The pair will be quiet on Monday on close of US markets. In the RBI MPC policy on Friday, the bank kept repo rate unchanged at 4 per cent but maintained an accommodative stance, implying more rate cuts in the future if the need arises to support the economy hit by the coronavirus crisis. On the global front, optimism over further federal fiscal stimulus will keep the investors’ sentiments high.

Technicals: Rupee has been trading in a consolidated range which is gradually forming higher lows. A well tested trendline supports comes in at 73.03 which connects to the previous low of 72.7650 (1st September, 2020).   Ichimoku cloud indicates a downtrend but we should also keep in mind that 144(74.96), 89(74.67) and 55(74.05)-SMAs are all above 74 and we are currently positioned at a trendline support from where we can bounce back. Price action had created a down gap at 73.6850 – 73.6050 (blue horizontal lines) – such price gaps in USDINR usually fill up, suggesting a move towards that range. Importers should hedge immediately for 1-3 months of exposure with forwards and vanilla options while exporters can target 73.60 – 73.80.

EURUSD - It’s also a relatively busy week ahead on the economic data front. On Tuesday, ZEW Economic Sentiment figures for Germany and for the Eurozone are in focus. The focus will then shift to Eurozone industrial production figures for August, due out on Wednesday. At the end of the week, the Eurozone’s trade figures for August will also garner some interest. On the monetary policy front, ECB President Lagarde is scheduled to speak on a number of occasions in the week. Expect any forward guidance or views on the economy to influence. Away from the economic calendar, Brexit and COVID-19 will need monitoring throughout the week.

Technicals: EUR/USD ended slightly above the critical resistance around 1.18 where the 55 day and 34 day SMA converged. The pair is trading substantially above 144 day SMA, but momentum remains on the downside. Critical resistance awaits around 1.19 level marking August and September highs. Strong support is at the psychologically significant level of 1.17 that cushioned the pair in October and August. 

GBPUSD - It’s a relatively quiet week ahead on the economic calendar. September claimant counts and August’s unemployment rate are due out on Tuesday and will influence. BRC Retail Sales Monitor figures, due out in the early hours of Tuesday, will also draw some attention. August’s employment change and average earnings figures are also due out but should have a muted impact on the day. Away from the calendar, Brexit and COVID-19 will also provide direction. David Frost is due to attend talks in Brussels. The markets will be looking for an agreement.

Technicals: Momentum is bullish on the daily chart. Pound is trading above the 100 and 200-day SMA.RSI is neutral. On Friday, pound went slightly above the psychological barrier of 1.30, which has capped the price multiple times with 50-day SMA converging. At this point, people seem to be focusing on the range between 1.2750 and 1.30. Above 1.30, the resistance lies at 1.35 that provided support in August. Support awaits at 1.2840, low of early October.

USDJPY - It is a relatively quiet week on the economic calendar. Key stats include core machinery orders, finalized industrial production, and tertiary industry activity figures. We would expect the core machinery order numbers to garner the greatest interest in the week. The key driver for the Japanese Yen, however, will be chatter from Capitol Hill and the U.S Presidential Election race.

Technicals: The pair stayed in the upper area of the descending channel starting from July. Resistance at 106 held in the second half of the week which is a strong downtrend line having tested multiple times. The psychological support at 105.00-03 levels from August lows is a critical support region. Momentum indicators are neutral.