Weekly Outlook: Economic Data & Interest Rate Decision In Focus

Weekly Outlook: Economic Data & Interest Rate Decision In Focus

04 Apr 2021 10:23 AM

Weekly Outlook 5th April to 9th April 2021

USDINR: It is a busy week for the Rupee on the economic calendar. The week starts with Nikkei Markit Manufacturing PMI followed by Nikkei Services PMI (Mar).Interest rate decision on Wednesday may provide some direction to the rupee. Changes in interest rate influences economic growth, inflation. Unemployment rate and foreign exchange rates. Reverse REPO Rate and Cash Reserve Ratio is also due on the same day. On the other hand, it is a busy week for the dollar as well, as economic proposal is expected to be released in April that would include –expansion of health Insurance coverage and child tax benefits, as well as paid family and medical leave. However, Biden also plans to increase corporate taxes from 21% to 28% and change the tax code to close loopholes that allow companies to move profit overseas which might be negative for the dollar. Aggressive vaccinations drives in the U.S. and Biden’s plan to provide vaccines to all the adult Americans by the end of May supported the greenback. Furthermore, US President Joe Biden presented his massive $2.25 trillion infrastructure spending plan which may be bullish for the dollar.

USDINR Tech: Volatility in USDINR in the last 2 trading sessions woke up most of the market participants from their slumber. Dollar opened substantially stronger on 30 Mar at 72.8475 from the previous trading day’s close of 72.51 (after an extended weekend) – a significant price up-gap (observe the purple horizontal lines). Dollar did cool off on the next trading day (last trading day of the financial year) to close at 73.1050. Daily candlestick chart of the last 1 year indicates that 72.25 – 72.45 (yellow horizontal lines) has become a vital medium term dollar support region. Do note that such a region was an important dollar resistance area during Aug’19 – Jan’20. It has now become a resistance turned support zone. Connecting the dollar peaks of the last 1 year , there is an important trend line resistance around 73.50 (notice the green color downward moving trend line). The momentum indicators of RSI, MACD and Slow Stochastics are hovering around the neutral territory, failing to provide any valuable indication.

EURUSD: It is a busy week for Euro ahead. The week starts with unemployment rate in the Eurozone followed  PMI figures for Germany and Eurozone. Lower unemployment rates and higher PMI figures would be positive for the Euro. Later in the week, German Factory Orders and German Industrial Production numbers are due. It is a leading indicator for production in the economy. We have the ECB Monetary Policy Statement on 8th March which would give some direction to the Euro.  The week ends with German Trade Balance numbers that measures the difference between export and import of goods over the month.

EURUSD Tech: The pair last traded at the bottom of an upward ascending channel at 1.1702. The support region extends from 1.16 to 1.17. A break below 1.16 handle could pave the way for another 300-pip fall. Towards the upside the pair might be met with some resistance at 1.1865 which also coincides with its 9-week simple moving average (red line).

GBPUSD: On the economic calendar, it is a relatively quiet week ahead for GBP. The week starts with Services PMI and Composite PMI numbers. A higher than expected reading should be taken positive for the GBP. Construction PMI numbers are due later in the week.  It measures the activity level of purchasing managers in the construction industry and a higher than expected will be taken positive for the GBP.  The week ends with RICS Housing Price Balance and Halifax House Price Index. RICS measures the percentage of surveyors reporting an increase in house prices in that area and Halifax house price index measures the change in the price of homes and properties financed by Halifax Bank of Scotland.  It is a leading indicator of health in the housing sector.

GBPUSD Tech: The pair has been consistently forming lower highs, indicating that the bulls are losing their strength. If the pair sustains below 1.3650, we may see levels like 1.3530 and 1.3470. The pair might see a resistance at 1.400, which is of psychological significance and also capped the pair during March, breaking which we may see the likes of 1.42.

JPYUSD: Japanese economic numbers show a steady 2.9% unemployment rate in March inspite of the fourth wave formation there. Bank of Japan’s Governor Haruhiko Kuroda, reiterated the continuation of ETF purchase within the JPY 12 trillion cap and not unloading their ETF holdings. The bank would maintain the 2% inflation target though impact of pandemic may persist for prolonged period. Vaccination pace across the globe and Biden’s spending plan are cues to watch for even though Tankan survey shows manufacturing and services sentiment is back to pre-pandemic levels in Q12021. Yen dips further as US dollar takes lead as a safer currency across the board. Last month saw the dollar appreciate by 3.62% against the yen with last six consecutive gain sessions. Sudden rise from Feb 23 low of 104.92 to Mar high of 108.95 further rise to high of 110.96 on Mar 31 saw a total rise of 5.76% in just 36 days. With reasons of further spread of virus already factored in, didn’t warrant March 2020 levels.

JPYUSD Tech: USDJPY is trading at its one year high, levels last seen in March 2020. A bearish MACD crossover is around the corner. A bearish crossover signals that the USDJPY might fall from this region if the crossover happens we might see further fall It is currently trading  in the overbought region (RSI is above 70) so we might see a corrective pullback towards 110 which is also the immediate support. The next significant support lies at 109.35.