Rupee Made a Strong Come Back in the Kerb

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Forex Research - Open Market Comments

US currency’s demand registered downward trend as rupee made a made a strong come back of 0/15 paisas against dollar in the kerb today. The US dollar kicked off yesterday's trading at Rs.83/65, shed some huge grounds today and was trading at Rs.83/50 and remain the same at  close of markets on Wednesday. Thus, rupee ended the day on a positive versus dollar in the kerb dealings. In the international dealings, The Japan yen rises strongly following broad based weakness in Asian equities. AUD/JPY and NZD/JPY are so far hardest hit as investors reverse carry trades. Nikkei's dropped over -1.3% to 10075, in response to disappointing consumer confidence report from US overnight. Today's development opens up the possibility of a head and shoulder top reversal pattern in Nikkei and focus is now shifted back to 9628 support. A break there will confirm whole rebound from 7021 has completed and would trigger sharp decline to 9000 level and below, which will in turn trigger rally extension in the Japanese yen. Dollar is currently consolidating overnight gains for the moment.
Some weakness is seen in USD/JPY which suggests that recent rebound is completed but the greenback is still in favor to strengthen against other major currencies. AUD/USD finally followed other major pairs and broke 0.9111 support to confirm topping. As noted before, a short term bottom is in place in the dollar index at 74.94 on bullish convergence conditions in 4 hours MACD. Rebound from there is expected to extend to have a test on 77.47 resistance after taking out near term trend line resistance. A break of 75.56 minor support is needed to invalidate this view. Otherwise, short term outlook in the dollar index will stay bullish. On the data front, Japanese retail sales dropped -1.4% yoy in September, slightly better than expectation of -1.5%. Australian CPI rose more than expected by 1.0% qoq in Q3, slightly more than expectation of 0.9%. Year-over-year rate also slowed less than expected to 1.3%. German import price index dropped more than expected by -0.9% in September. Main focus today will be on US durable goods orders and new home sales. GBP/JPY's break of 149.12 minor support suggests that fall from 153.21 is resuming. As discussed before, rebound from 139.69 should have completed at 153.21 on bearish divergence conditions in 4 hours MACD and RSI. Intraday bias is now on the downside for 144.51 resistance turned support first and break will bring retest of 139.69 low. On the upside, above 151.15 minor resistance will turn intraday outlook neutral again with focus back to 153.21/154.13 resistance zone.

In the bigger picture, the bearish outlook remains unchanged with 61.8% retracement of 163.05 to 138.72 at 154.13 intact. Medium term rebound from 118.18, which is treated as correction to the larger down trend from 07 high of 251.90, has completed with a double top reversal pattern (162.56, 163.05). Fall from 163.05 is tentatively treated as resumption of the long term down trend and should target a new low below 118.81 after completing the rebound from 139.69. However, note that decisive break of 153.22/154.13 resistance zone will argue that fall from 163.05 has completed at 139.72 already. This will in turn argue that it's probably just a correction to the medium term rise only. Another high above 163.05 might be seen in such case before rise from 118.81 concludes.

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