INR: USDINR Closes Back Above 87.00 Amid Outflow, Policy Pressures
Feb-26 11:22
USDINR gained a further 0.57%, taking the pair back above the 87.00 handle amid a mixed showing for Asia FX during Wednesday's session. There was no clear driver behind INR weakness, but the pressure remains via outflows from local equities, RBI easing and concerns over US tariffs.
- Indian equities saw the highest net selling by global investors in a month at the start of the week, with data showing a net $659.7m of equities was sold on Feb 24. That takes year-to-date outflows to an impressive $12.2bln.
- The Nifty and Sensex indices have hit multi-month lows recently, and both are over 4% lower on the year so far. Concerns over deteriorating US sentiment and global growth appear to be mounting as US Treasuries rally amidst a tech-led stock selloff, while the RBI’s latest minutes release suggests that officials are becoming more attentive towards initial signs of more tepid domestic growth.
- Note that Q4 2024 GDP data is due this Friday and is expected to be around 6.2% Y/Y, up from Q3’s 5.4%.
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USDJPY TECHS: Clears Key Short-Term Support
Jan-27 11:21
- RES 4: 159.45 High Jul 12
- RES 3: 159.26 0.618 proj of the Sep 16 - Nov 15 - Dec 3 price swing
- RES 2: 158.08/87 High Jan 15 / 10 and the bull trigger
- RES 1: 156.75 High Jan 23
- PRICE: 153.87 @ 11:20 GMT Jan 27
- SUP 1: 153.34 Low Dec 18
- SUP 2: 152.55 61.8% retracement of the Dec 3 - Jan 10 bull leg
- SUP 3: 151.81 Low Dec 12
- SUP 4: 151.06 76.4% retracement of the Dec 3 - Jan 10 bull leg
The primary trend condition in USDJPY remains bullish, however, today’s move down suggests scope for a stronger short-term bearish cycle. The pair has cleared two important support points; 155.15, the 50-day EMA (pierced), and 154.97, a trendline drawn from the Sep 16 ‘24 high. This paves the way for an extension towards 152.55, a Fibonacci retracement point. Initial firm resistance has been defined at 156.75, the Jan 23 high.
STIR: Tech-Led Risk-Off Sees End-2025 Rates Back At Median FOMC Dot
Jan-27 11:16
- Fed Funds implied rates are sharply lower from Friday’s close on broad risk-off on the back of the tech-led equity sell-off.
- This week’s decision is still seen as a lock-in for a pause, but a 25bp cut in March is starting to be seen as closer to 50/50 call with 10bp priced. June is still the next meeting with a 25bp cut fully priced though.
- Fed Funds last priced >50bp of cuts for 2025 briefly before the hawkish Dec 18 FOMC decision and before that Dec 13. It leaves the end-2025 point back in line with the median FOMC dot from that decision, having climbed from the 32bp priced before CPI less than two weeks ago.
- Cumulative cuts from 4.33% effective: 0.5bp Jan, 10bp Mar, 18.5bp May, 31bp Jun, 35.5bp Jul and 51bp Dec.
OUTLOOK: Price Signal Summary - USDJPY Clears Two Important Support Points
Jan-27 11:14
- In FX, EURUSD remains in a short-term bull cycle - a correction. Last week’s gains resulted in a breach of the 50-day EMA, at 1.0457. The break higher strengthens short-term bullish conditions and sights are on 1.0574, 38.2% of the Sep 25 - Jan 13 bear leg. Initial support to watch is 1.0377, the 20-day EMA. A move through the EMA would signal a possible reversal.
- Friday’s gains in GBPUSD reinforces current bullish conditions. The pair has traded cleanly through the 20-day EMA, marking an extension of the reversal that started Jan 13. The break higher exposes the 50-day EMA, at 1.2520 and an important resistance. Clearance of the average would highlight a stronger bull cycle. First support lies at 1.2294, the Jan 23 low.
- The primary trend condition in USDJPY remains bullish, however, today’s move down suggests scope for a stronger short-term bearish cycle. The pair has cleared two important support points; 155.15, the 50-day EMA (pierced), and 154.97, a trendline drawn from the Sep 16 ‘24 high. This paves the way for an extension towards 152.55, 61.8% retracement of the Dec 3 - Jan 10 bull leg. Initial firm resistance has been defined at 156.75, the Jan 23 high.
