India is considering a series of financial support mechanisms for its ailing business sectors, as the Covid-19 pandemic keeps the global economy hostage. The government is under pressure to lift the nationwide lockdown in a measured way, due to limited resources for ongoing assistance. It copes with identical difficulties duplicated around the world as epidemiology faces off against economics. One step towards preserving jobs and food security was taken by allowing agriculture to resume. Social distancing is easily implemented in rural India, and farmers may provide the unexpected safety net to an excessive GDP contraction in 2020. The USD/INR entered a correction and is now testing the bottom range of its short-term resistance zone, from where the next phase of the sell-off is expected.
The Force Index, a next-generation technical indicator, confirms the dominance of bearish pressures and remains below its horizontal resistance level in negative territory. With the ascending support level detaching further from the Force Index, as marked by the green rectangle, the descending resistance level is exercising consistent bearish momentum. This technical indicator is anticipated to contract more profound from current levels, allowing bears to maintain the established downtrend in the USD/INR.
A series of lower highs and lower lows established a dominant bearish chart pattern. The current bounce off of the top range of its support zone located between 73.666 and 73.993, as marked by the grey rectangle, represents a necessary pause and ensures the health and longevity of the long-term trend. Today’s US ISM Manufacturing PMI for April is likely to provide the next fundamental catalyst for a resumption of the breakdown in the USD/INR. US data has been consistently worse than economists hoped for, while the primary response from policymakers is more debt without a sustainable path forward.
While price action may temporarily spike into its ascending 61.8 Fibonacci Retracement Fan Resistance Level, passing through its short-term resistance zone, the correction in the USD/INR is positioned to extend. This zone is located between 75.003 and 75.404, as identified by the red rectangle. Given the mispriced US Dollar, detached from fundamental conditions, a breakdown extension is favored. The next support zone awaits this currency pair between 72.348 and 72.702.
USD/INR Technical Trading Set-Up - Breakdown Extension Scenario
Short Entry @ 74.800
Take Profit @ 72.350
Stop Loss @ 75.500
Downside Potential: 24,500 pips
Upside Risk: 7,000 pips
Risk/Reward Ratio: 2.50
In the event the Force Index pushes above its ascending support level, presently serving as resistance, the USD/INR may attempt an extension of its current recovery. Forex traders are advised to view any breakout as a temporary development and second selling opportunity, as US economic disappointments are expected to continue. The upside potential is reduced to its 38.2 Fibonacci Retracement Fan Resistance Level.
USD/INR Technical Trading Set-Up - Limited Breakout Scenario
Long Entry @ 75.850
Take Profit @ 76.200
Stop Loss @ 75.700
Upside Potential: 3,500 pips
Downside Risk: 1,500 pips
Risk/Reward Ratio: 2.33
