1) The document provides a weekly outlook and trade recommendations for the USDINR currency pair, noting that bull markets are born on pessimism and die on euphoria. 2) It recommends buying USDINR if the candle opens above 61.069 on Monday with targets of 61.50-61.80, and selling at 60.70 with a target of 59.50. 3) Key events this week are the release of US GDP data and comments from US policymakers on monetary policy that could impact expectations around interest rate hikes in 2015. Surprise comments against rate hikes could see INR appreciating to 60.30.

1. USDINR Weekly Outlook
Brace up for election
euphoria
"Bull-markets are born on pessimism, grow on skepticism,
mature on optimism and die on euphoria."
- Sir John
Templeton

2. Trade Recommendation
O Buy USDINR on Monday if the candle opens above 61.069
Target 61.50-61.80 stop loss 60.80
O Sell USDINR limit 60.70 Target 59.50 stop loss 61.10

3. Key events
Event Expected outcome Impact on USDINR
US GDP 2.1% annualized year over
year
Upward revision of GDP
would strengthen US
Dollar
US Policy makers speak
on monetary policy
Markets will watch out for
comments on possible
interest rate hike in 2015
US Dollar to strengthen if
policymakers support
interest rate hikes in 2015
Surprise Element – US policy makers squash expectations of
interest rate hike in 2015 will see INR appreciating against the US
Dollar to 60.30 levels and below

4. Weekly Chart

5. Lowest monthly closing since Aug 2013 ?

6. Technical Developments
O Weekly Chart
O Last week’s closing is at 50% retracement level (61.06) of 2013
USD/INR high-low
O From weekly chart, range for this week is likely to be 60.80 to 61.50
O Monthly Chart
O USDINR may end up at its lowest level on 28th
March 2014. Multiple
monthly candles since September 2013 have tested 60.80-61.00
levels, although the monthly closing levels were consistently above
61.80 levels each time.
O USDINR may rise sharply in next month if the march month candle
rebounds to end above 61.80 levels on 28th
March
O Conclusion
O USDINR to test 61.50 – 61.80 levels if the candle opens above
61.05 on Monday
O 61.80 to provide strong support this week

7. Macro Developments
Domestic front
O Rupee and domestic equity markets would continue to be resilient
amid global uncertainty on possibility of BJP win in upcoming
elections
O Euphoric moves are likely to be sharp in favor of Rupee, hence it is
advisable to square of loss making long USDINR positions
O Reserve Bank of India is likely to defend 60.00 levels by buying up
US Dollars
O The sharp euphoric rallies in rupee provide opportunity to shore up
dollar reserves
O Conclusion
O Modi hype will dominate fundamentals and shall keep lid on rupee
weakness

8. Macro Developments
Global front
O US Federal Reserve announced Taper of $10 billion which was largely in line with
market expectation
O Possibility of interest rate hike in 2015 came as surprise which pushed USDINR to
61.30 levels on Thursday
O Gains were erased as markets doubt interest rate hike in 2015
O Host of fed policymakers speaking this week may come out in support of interest
rate hike which will push up USDINR
Inter market relationships
O Rupee is directly correlated to EUR. Given that there is a high possibility of EURUSD
appears due for correction, INR may decline
O However the direct correlation between INR and EUR appears weak off late
whenever EUR falls
O On the other hand, correlation remains strong whenever EUR rises
O Hence falling EUR may not lead to sharp fall in INR. Moreover losses in INR appear
capped around 61.50-61.80 levels
Conclusion
O Do not carry long USDINR positions for April. Wait to see USDINR March month
closing
O Sell USDINR around 61.50-61.80 levels and below 60.80 levels