Weekly Outlook 19th October to 23rd October, 2020

Weekly Outlook 19th October to 23rd October, 2020

18 Oct 2020 11:58 AM

USD/INR – It’s a relatively quiet week on India’s economic calendar in the upcoming week. No material stats due to be released leaves Rupee in the hands of COVID-19 news and RBI. India's foreign exchange reserves rose to $551.51 billion as of Oct 9, compared with $545.64 billion a week earlier, the Reserve Bank of India said on Friday. RBI is set to auction T-bills worth 160 billion rupees on 21st October, 2020 for 91, 182 and 364-day maturities. In the US on Tuesday, Wednesday, and Thursday, housing sector figures for September are in focus. With mortgage rates hovering close to historic lows, the numbers are unlikely to have a material impact on the Dollar. On Thursday, however, U.S jobless claims figures will influence, October’s prelim services, manufacturing, and composite PMIs are due out at the end of the week. Wednesday’s final live televised Presidential debate will garner plenty of attention as will chatter from Capitol Hill. We can also expect increased interest in the Senate Election polls.

Technical – Rupee has been trading in a consolidated range of 73-73.60. A well tested trendline supports comes in at 73.03 which connects to the previous low of 72.7650 (1st September, 2020). Price action had created a down gap at 73.6850 – 73.6050 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.

EUR/USD – It’s also a relatively busy week ahead on the economic data front. On Tuesday, German wholesale inflation figures are due out ahead of a busier 2nd half of the week. On Thursday, Germany is back in focus, with November consumer climate figures due out. Prelim October private sector PMIs from France, Germany, and the Eurozone will be the key drivers on Friday. A new spike in new COVID-19 cases in France and other parts of the EU may have impacted activity at the start of the quarter. Away from the economic calendar, Brexit and COVID-19 will need monitoring throughout the week.  

Technical – Euro tried to break above the uptrend line but after failing to do so it came back towards 1.17 level. If the pair below the weekly close of Friday then we are likely to see a move towards 1.16 level and then due to lack of support we might see 1.15 too. We should expect a very choppy price action until the market sees through the lack of directional bias.

GBP/USD – It’s a busy week ahead on the economic calendar. The markets will have to wait until Wednesday, however, for the first set of numbers. Inflation figures for September are due out ahead of CBI industrial trend orders on Thursday. We would expect the Pound to be sensitive to the inflation figures ahead of a busy end to the week. On Friday, retail sales figures for September and prelim October private sector PMIs will provide direction. With the BoE open to negative rates, dire numbers will test support for the Pound. Of greater influence in the week, however, will be Brexit and COVID-19 news.

Technical – The pound tried to rally in the week upwards of 1.30 but failed to do so amidst a pullback the 1.29 level. End of the week was weighed down by the prevalent bearish sentiment surrounding Brexit. The is currently on the lookout for a new direction. The 50-week SMA is closer to 1.2750 which has also been a significant support level in the past. Going ahead we can expect a choppy price action as the pair consolidates between 1.31 and 1.2750.

USD/JPY – It is a relatively quiet week on the economic calendar. Trade data for September will draw interest at the start of the week ahead of inflation at the end of the week. We don’t expect the numbers to have too much influence on the Yen, however. The key driver for the Japanese Yen, however, will be COVID-19 news and U.S politics.

Technical – After forming an inverted hammer in the previous week the pair almost reached towards ¥105. This week’s candlestick also almost looks like a hammer indicative of a likely choppy price action going ahead. If the price action breaks down below the ¥105 level it is likely that we go down towards the ¥104 level. A breakdown below there then opens up the possibility of a move towards ¥102.