INR: Indian Assets Rally as Exit Polls Show Modi Set for Landslide Election Win
- Several exit polls showed Prime Minister Narendra Modi’s Bharatiya Janata Party-led National Democratic Alliance will win substantially more seats than the 272 needed for a majority in India’s 543-seat lower house of parliament.
- The results have boosted Indian financial assets, while USDINR 1w implied vols have slipped sharply from 5.70% on Friday to around 3.79% at typing. The Nifty and Sensex indices stand over 3% higher on the day, both at fresh record highs. Meanwhile, USDINR traded as much as 0.63% lower compared to Friday’s high, reaching an intraday low of 82.9512 at the start of the session– its lowest levels since mid-March.
- Following the results, Goldman Sachs note that a narrow current account deficit and adequate FX reserves means that the INR offers resilient carry. Additionally, inflation back within the RBI's target range and a consolidating fiscal deficit means that IGBs remain attractive. They continue to recommend long 2-year IGBs and short EURINR, and continue to see further upside in equities.
- In addition to the election results, the above-consensus GDP data released outside of trading hours on Friday is likely providing an additional tailwind to the INR at the margins. Looking ahead, the RBI rate decision at the end of the week provides the highlight on the local calendar, where analysts are expecting the MPC to retain their policy stance and keep the policy rate unchanged at 6.50%.
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AUSSIE 10-YEAR TECHS: (M4) Trend Needle Continues To Point South
- RES 3: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.110 - High Dec 28 and the bull trigger
- RES 1: 95.800 - High Apr 19
- PRICE: 95.595 @ 16:01 BST May 03
- SUP 1: 95.235 - 76.4% retracement of the Nov - Dec ‘23 rally
- SUP 2: 94.965 - Low Oct 31 ‘23
- SUP 3: 94.866 - 2.618 proj of the Dec 28 - Jan 19 - Feb 2 price swing
A bearish cycle in Aussie 10yr futures remains in play and the latest extension reinforces current conditions. A continuation would signal scope for a move towards 95.235, a Fibonacci retracement point on the continuation chart. Key short-term resistance has been defined at 95.800, the Apr 19 high. A break would highlight a possible reversal and signal scope for a climb towards 96.110, the Dec 28 high.
US OUTLOOK/OPINION: GS Continue To Expect Two Fed Cuts This Year
- Writing on today's payrolls report, Goldman Sachs note that “Job growth remained rapid in the healthcare industry but slowed sharply across leisure and government, raising the possibility that rehiring in those two sectors has mostly run its course.”
- “The household survey was soft, with the unemployment rate increasing 0.1pp to 3.9%, driven by a 25k increase in household employment.”
- “Our estimate of the underlying pace of job growth based on the payroll and household surveys now stands at 189k, though we estimate that counting immigration fully would boost this by 20k.”
- “Our Q1 wage tracker stands at +4.5% on a quarterly annualized basis and +4.3% on a year-over-year basis.”
- “We continue to expect two rate cuts this year, in July and November.”
USDCAD TECHS: Support At The 50-Day EMA Remains Intact
- RES 4: 1.3977 High Oct 13 ‘23 and a key M/T resistance
- RES 3: 1.3899 High Nov 1 and a key resistance
- RES 2: 1.3846/55 High Apr 16 and the bull trigger / High Nov 10 2023
- RES 1: 1.3785 High Apr 30
- PRICE: 1.3687 @ 16:21 BST May 3
- SUP 1: 1.3622 50-day EMA
- SUP 2: 1.3610 Low May 3
- SUP 3: 1.3547 Low Apr 9
- SUP 4: 1.3478 Low Apr 4
Despite the latest pullback in USDCAD, a bullish trend condition remains intact for now and the move lower appears to be a correction. The pair has recently cleared 1.3614, the Mar 19, 22, 25 and 29 highs, strengthening a bullish theme. Note too, that moving average studies are in a bull-mode position. Key support to watch is 1.3622, 50-day EMA. This average has today been pierced, but remains intact as a support.
