Insignia Consultants
New Delhi
Friday, 01 May 2020
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NSE CURRENCY FUTURE MAY MONTHLY VIEW
Trend of the rupee against the major currencies after the staggered opening of India will be the key. There should be a staggered opening. Jobs hiring and job losses in totality will be closely watched. Rupee will weaken and break past 77.1000 if the corona virus does not show signs of sustained reduction. CVOID spread/unspread is the key for the month of May not just for India but for the world.
Historically low crude oil prices and high forex reserves has prevented rupee from breaking past 80.00 against the US dollar. If crude oil prices gallops in May, then rupee will weaken against the US dollar and other major global currencies. Towards the end of May, progress of Monsoon in Southern coast will affect rupee. Early monsoon and sustained monsoon will result gains for the rupee and vice-versa.
Foreign inflows in stocks and bond will rise continuously if India is able the tame the CVOID. India is still the second best growing nation (after China). Long term valuations of stocks are very attractive. Bond yields offer better return than other parts of the globe. Mergers and Acquisitions (M&A) will rise. Indian companies are takeover targets by large corporates who are getting free money from their central banks. Interest rates in USA and Eurozone are zero to negative. India offers a safe and relatively higher returns than most nations. There will be competition from Indonesia. Vietnam, Cambodia and China.
Various US jobs number till 8th May will affect the direction of the US dollar Index.
1. US DOLLAR-INDIAN RUPEE (USD/INR) MAY. CURRRENT PRICE 75.2825:
• There is a big double top around 77.0600. Rupee can fall to 74.2900 and 73.2975 as long as it trades below 77.0600.
• Fifty day moving average at 74.4500 is the initial support.
• Hundred day moving average at 72.9000 is the key long term support.
• If rupee does not fall below 50day MA of 74.4500 then it will rise to 77.2675-79.250 and 80.4775.
2. EURO-INDIAN RUPEE (EURO/INR) MAY. CURRRENT PRICE 81.8700:
• Fifty day moving average at 81.4600 is the key support for May.
• Hundred day moving average at 80.3600 is the key long term support.
• Euro/inr needs to trade over 80.3600 in May to rise to 83.0025-85.9725 and 86.9425.
• Key resistance (for May) is at 83.8000.
• Crash or sell off will be there only if (a) euro/inr trades below 80.3600 to 78.7375 nd 77.7675 (b) Euro/inr does not break 83.8000.
3. UK POUND-INDIAN RUPEE (GBP/INR) MAY. CURRRENT PRICE 94.1800:
• Hundred day moving average at 93.3000 is the key support for May.
• There is a big double top around 95.1900.
• Bearish case: Cable can fall to 92.7075 and 90.9300 as long as it trades below 95.1900.
• Bullish case: (a) Key resistance of 95.1900 is broken. Then 97.1300 will be the target. (b) Gbp/inr does not fall below 93.300 then will rise to 95.1900 and 97.1300.
4. JAPANESE YEN-INDIAN RUPEE (USD/INR) MAY. CURRRENT PRICE 70.6300: (
• Fifty day moving average at 68.7800 is the key support.
• Key resistance for May month is between 71.9775-72.1600.
• Yen/inr needs to trade over 71.9775 in May month to rise to 72.8125 and 74.1625.
• Crash or sell off to 68.780 and 66.2650 will be there if yen/inr does not break 71.9775.
• Any increase in safe haven demand in currencies globally can result in yen/inr rising to 73.3800 and 74.3125 this month.
Export and import (EXIM) activity in India is only by large corporates and state run enterprises. EXIM activity by medium sized enterprises and SME’s is almost nil. Importers are unable to get their goods cleared from ports due to lack of funds. Demurrage charges are also very high. There is no measure announced to reduce demurrage charge at port. Once lockdown opens and economic activity resumes then import payable demand will rise sharply. Rupee can weaken quickly against the US dollar and major currencies.
Exports are also at a standstill. There will be a big increase in bad debt of small and tiny exporters. New export orders will take time to come. New export orders will also take more time and more cost to execute due to the need to maintain social distancing.
Rupee will be very volatile in May. Traders need to use stop losses. Exporters and importers should hedge their near term receivable and payable. One can also sell one year forward in usd/inr on any weakness over two percent.
Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. All analyses used herein are subjective opinions of the author and should not be considered as specific investment advice. Investors/Traders must consider all relevant risk factors including their own personal financial situation before trading. Websitewww.insigniaconsultants.in. Prepared by Chintan Karnani
Disclosure: Insignia consultants or it employees do not have any trading positions on the trading strategies mentioned above. Our clients do have positions on the trading strategies mentioned in the above report.
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NOTES TO THE ABOVE REPORT
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