INR may get support from Chinese rate cut and Draghi comments:: Edelweiss

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• Indian Rupee bounced back after hitting nine month low of 62.20 mark in the spot. A surprise rate cut by China late on Friday coupled with record-breaking rally in domestic equity and strong capital flows continued to keep the rupee in a better position. Earlier in the week, the Rupee was seen under pressure as India had to give the third trance of oil payments to Iran by 24th November. Hence, strong demand for the greenback persisted in the spot and forward markets, keeping the rupee under pressure. But suspected RBI intervention and exporters selling above the level of $62 helped limit the Rupee’s fall despite weaker Euro and stronger US dollar
• The Euro witnessed strong fall in Friday’s session and was down by 1.22% against the US dollar after ECB President Mario Draghi said that the central bank could increase the QE if needed to spur Eurozone growth to bring inflation near target level, which is currently under deflation. The US Dollar Index rose to its highest level in more than four years on Friday, boosted by the euro’s declines
• Brazil’s real extended its weekly rally to the biggest since January 2012 on speculation that President Dilma Rousseff is close to nominating a team capable of reviving Latin America’s largest economy. Japanese Finance Minister Taro Aso commented on the yen’s depreciation for the first time last week saying that the currency had declined too fast. Post his comments, the yen gained momentum and bounced back from the level of 117.77 to 117.20 mark

Currency Outlook for This Week

• Rupee is likely to trade with a positive bias for the week as record high domestic equity spurred by strong capital flows in both INR debt and equity coupled within a surprise rate cut by China to support growth will keep the rupee in a better position. ECB President’s statement of possible further increase in QE will continue to support FII flows into EMs like India which is likely to benefit Indian financial assets
• USDINR has formed a gravestone Doji on the upside on daily charts which is a bearish candlestick pattern. This suggests that the upside in US dollar will be limited till the high of the Doji doesn`t get broken. A downside correction can be seen in coming session towards 61.50 to 61.00 levels till the high of Doji holds as key resistance