Forex markets : Intraday Outlook and Strategy

The Indian rupee hit its weakest level in more than two months on Monday pressured by weakness in local equities along with US dollar pullback.  The immediate expiry May contract closed at 45.29, after posting an intraday high of 45.36.

Symbol	Series/Expiry	Open	High	Low	Close	Chg	% Chg	OI	Vol
USDINR	27-May-2011	45.1500	45.3625	45.1175	45.2975	0.2500	0.55%	634,252	3,599,910
USDINR	28-Jun-2011	45.3500	45.5675	45.3100	45.5050	0.2300	0.51%	198,054	213,011
EURINR	27-May-2011	63.6900	63.7800	63.3625	63.4650	-0.6700	-1.04%	39,206	144,232
EURINR	28-Jun-2011	64.0000	64.1500	63.6300	63.7125	-0.6900	-1.07%	20,683	24,750
GBPINR	27-May-2011	73.1000	73.3750	73.0050	73.0600	-0.0450	-0.06%	7,088	26,288
GBPINR	28-Jun-2011	73.3000	73.6625	73.3000	73.3400	-0.0775	-0.11%	2,971	4,064
JPYINR	27-May-2011	55.0100	55.7025	55.0100	55.3375	0.1925	0.35%	8,602	34,389
JPYINR	28-Jun-2011	55.3000	55.9100	55.3000	55.5775	0.1950	0.35%	4,481	8,309

Indian equities tracked the biggest drop in Asian stocks in two months after Fitch Ratings lowered Greece’s credit rating and Standard and Poor’s (S&P) said Italy’s rating was at risk. The S&P CNX Nifty on the National Stock Exchange lost 1.8% to 5,386.55. The Sensex closed at 17993.33, down 1.82%.

The Euro dropped tracking decline in equities and commodities which pulled down EURUSD below the 1.40 mark during mid European session. The EURINR May future contract lost 1.04% or 67 paisa on Monday to close at 63,46. However, the GBPINR remained flat with slight downside bias despite decline in GBPUSD, as USDINR rose over half a percent

In Asian currencies, the Yen fell to a low of 55,01The Sensex closed at 17993.33, down 1.82%. v/s the Indian rupee however covered some lost ground taking support from USDINR. The JPYINR May future contract closed the session up 0.355 at 55.3375.

Euro sentiment has been turning bearish now and in the overnight market the EURUSD remained lower. In Asia today it is currently trading above 1.40 mark. A further drop could come as more hedge funds and speculative investors unwind pro-euro bets. These have been cut rapidly, according to CFTC data. Long euro positions fell to $7.4 billion as of May 17, down from $18.4 billion two weeks earlier.

Intraday Outlook

USDINR May contract is likely to find stiff resistance at 45.35 levels and if market fails to break and sustain above the same then we may see correction towards 45.15 and then towards 45.05 levels. For intraday, we see sideways to lower move in USDINR

The EURINR contract may see good support at 63.30 levels and if the level is maintained then pullback is possible. Resistance is seen at 63.65 levels and breach of the same may head recovery towards 63.80 levels.

In case of Pound the May GBPINR contract is likely to take resistance at 73.00 levels and market sustains below the same should stay weak for the session. The support is seen at 72.65 and then 72.50 levels.