Dollar can dip before rising again
Supports are there to limit the downside and keep the broader bullish view intact
Britannia Industries (₹4,797.6) Faces strong barrier
Britannia Industries’ stock has been in a steady downtrend since early this year. It started falling on the back of the resistance at ₹5,370. Notably, the stock has been falling in a downward channel. Last week’s rally has now taken the scrip to the upper end of the channel, at ₹4,850. Around this price region, the 20-, 50- and 100-day moving averages coincide, making it a strong barrier. We expect Britannia Industries’ stock to resume the fall and retest the support at ₹4,650. Hence, one can short the stock now at ₹4,800. Place initial stop-loss at ₹4,875. When the price dips to ₹4,720, revise the stop-loss to ₹4,800. Move the stop-loss further lower to ₹4,760 when the price falls to ₹4,680. Exit at ₹4,650.
Excel Industries (₹1,043.2) Outlook turns bullish
Excel Industries’ stock has gained nearly 50 per cent so far this month.
The swift rally has lifted the stock above the key hurdle at ₹1,000. The outlook has now turned bullish. There is a possibility for the price to see a correction. However, it cannot overturn the upward trend and the decline will most likely be limited to ₹900. Post this move, Excel Industries can resume the upswing where the price is expected to touch ₹1,250. Therefore, we recommend buying this stock now at ₹1,043 and accumulate if the price softens to ₹920. Keep initial stop-loss at ₹840. When the scrip rises to ₹1,130, alter the stop-loss to ₹1,070. Further, raise the stop-loss to ₹1,150 when the price moves to ₹1,200. Liquidate the longs at ₹1,250.
Valor Estate (₹232) Cup and handle pattern seen
The stock of Valor Estate, earlier DB Realty, has been showing recovery in April after witnessing a considerable fall in price in March. It bounced o the support at ₹195 early this month. Currently trading at ₹232, the stock shows potential to appreciate. A clear breach of ₹232 will confirm a cup and handle, a bullish chart pattern. While there could be a correction to ₹220, we anticipate Valor Estate’s share price to go up to ₹280 in the near term. Traders can buy this stock now at ₹232 and add longs if the price moderates to ₹220. Place initial stop-loss at ₹200. When the stock rises to ₹250, lift the stop-loss up to ₹230. Tighten the stop-loss to ₹250 when the price hits ₹265. Book profits at ₹280.
The dollar index remained subdued and fell almost all through last week. However, on Friday, the index managed to rise back sharply, recovering most of the loss. The US Personal Consumption Expenditure (PCE), the US Federal Reserve’s inflation gauge data release on Friday triggered that reversal in the dollar index.
The US PCE rose 2.71 per cent (year-on-year) in April. This was higher than the 2.5 per cent rise seen in the month of March. The rise in PCE strengthened the case for the US Federal Reserve to delay the rate cuts this year. That, in turn, took the dollar index higher on Friday.
FED WATCH
Under this circumstance, the US Fed meeting this week on Wednesday is going to be very important to watch. The central bank will keep the rates unchanged. But what is its stance on inflation? Will the Fed hint anything on the timing of the rate cuts? If there is a clear answer for these two questions, then that could largely impact the markets. We will have to wait and watch.
OUTLOOK MIXED
The immediate outlook
is
RUPEE WATCH
Rupee can recover more towards 83.20 and 83.10 as long as it stays above 83.45 mixed for the dollar index (105.94). Supports are at 105 and 104. Resistance is in the 107-107.50 region. Looking at the daily chart, if Friday’s bounce fails to sustain, then there are good chances for a fall at least to 105 this week.
To negate this fall, the dollar index has to get a strong follow-through rise from here breaking above 106.50. It is a wait and watch situation now.
RESISTANCE HOLDS
The US 10Yr Treasury yield (4.66 per cent) has been struggling to breach the 4.7-4.75 per cent resistance zone over the last couple of weeks. Immediate support is at 4.6 per cent. A break below it can take the yield down to 4.5-4.48 per cent or even 4 per cent in the coming days.
A decisive break above 4.75 per cent is needed to gain bullish momentum. Such a break can take the 10Yr Treasury yield up to 4.9 per cent and even 5 per cent in the coming weeks.
SUPPORTS AVAILABLE
The euro (EURUSD: 1.0693) rose breaking above the 1.0720 resistance last week, but did not sustain. The currency made a high of 1.0753 and then fell sharply from there on Friday.
Immediate support is at 1.0670. Below that, 1.06 is the next strong support. A bounce from either of these two supports can take the euro up to 1.08-1.0830 in the near term.
However, a rise beyond 1.0830 is unlikely. As such, we can expect the euro to reverse lower again from the 1.08001.0830 region.
The euro will come under pressure only if it declines below 1.06. Such a break can drag it down to 1.05-1.0450.
MORE RECOVERY
The Indian rupee (USDINR: 83.35) recovered to test the resistance at 83.30 last week. It made a high of 83.26 and has come down slightly from there. Immediate supports are at 83.40 and 83.45.
As long as the rupee trades above these support, a further recovery towards 83.20 and 83.10 can be seen in a week or two.
Key support is in the 83.5583.60 region, which can be tested if a break below 83.45 happens.
The rupee will come under more pressure only if it declines below 83.60. In that case, a fresh fall to 83.75 and even 84 can be seen.