Dollar/Rupee had the biggest daily jump in two months – What’s next?

The dollar/rupee sparked nearly one per cent in the past two sessions. Pair jumped to its one-month high yesterday weighed down by outflow from equity markets and disappointing domestic macroeconomic data.

The strength of the US dollar against its major counterparts amid fears of a Fed rate hike and crude oil prices hovering above USD 76 per barrel also put downside pressure on the rupee.

Adding to this,  the U.S. labour market remains strongly increased chances the Federal Reserve will raise interest rates later this month. According to an ADP National Employment report, private payrolls increased significantly in June, the most since February 2022, while the Labour Department reported that the number of Americans submitting new claims for unemployment benefits increased only modestly over the previous week.

The Labour Department reported that initial claims for state unemployment benefits increased by 12,000 to a seasonally adjusted 248,000 for the week ending July 1. There were 3,000 fewer applications than originally indicated in the data for the previous week.

ADP National Employment report showing private payrolls jumped by 497,000 jobs last month after rising 267,000 in May bodes well for June’s employment report.

The focus this week is on the slew of important US data releases later today.  US private payrolls and jobless claims released yesterday remain in favour of the dollar.

The major central banks for the most part are fine-tuning monetary policy, and it is unclear when they will act as they alternate between hiking and pausing interest rates, this could hold volatility in major currencies pair in the near term.

Technical Outlook

Since 5 July 2023, USDINR has bottomed out and the pair gained nearly 1%. From the low of 81.7575 yesterday it jumped towards 82.7900, its one-month high.

The pair settled at 82.7380 with an intraday gain of 0.45%.

On the above chart, the pair is trading on the verge of massive resistance at 82.9550 coinciding with rectangle triangle consolidation.  A break above will confirm a 2%-3% upside move in the near future.

Alternatively, failure of the break will again put pressure and the pair may retreat towards 82.35-81.80.

Hence, it’s expected that the pair may remain between 82.95-81.80 consolidation zone unless it gives a break above 82.9550. 

Adding to this, U.S. nonfarm payroll numbers are due to release later today. Any favourable data will raise fear of a rate hike in July which could add some gain in the Dollar/Rupee also.