Before going into the weekend the USD/INR produced a strong bearish trend and tested important support levels, but upon opening early today, the forex pair has shown risk sentiment in the global markets. Early buying of the USD/INR has taken the Indian Rupee back into the middle of its five-day range. The US Dollar has been weaker across the board against major currencies in recent trading, but how long will investors hold out before buying the USD if risk-averse trading escalates and builds momentum?
The range of the Indian Rupee remains within its known value band, but if trading takes a turn for the worse and selling grows in global equity indices, volatility may not be far behind. Speculators could have fundamental beliefs challenged if they have to make decisions based on technical charts versus their emotional instincts for the next two days. Perhaps things will calm down, perhaps this is a just a short term wave of fear emerging in the markets. Speculators need to remain calm and use risk management as a tool to guide them if risks grow.
Resistance levels have proven strong for the USD/INR the past couple of weeks and have provided a solid ground to seek reversals. This morning’s short buying splurge of the USD/INR has taken the forex pair within the vicinity of 74.5600 and 74.6000, which setups a great test for technical traders based on their short term perceptions. Resistance around the 74.6700 may be tempting to target and if that juncture is broken, traders may aim for the 74.8000 mark which has proven a strong resistance level before.
Traders who believe the markets will reverse cannot be faulted, but they should use limit orders in my opinion to seek bearish trends short term. Support around the 74.4000 has been tested consistently recently and may come into focus again, but the question is when. It seems likely that the next couple of days may actually produce more upside action meaning buying of the USD/INR could be strong until risk appetite reemerges.
Speculators need to ask themselves important questions about risk-reward today. If global sentiment remains under pressure the USD/INR may prove that it is part of the known safe-haven play, meaning the USD may find buyers short term as investors rely on old habits.
Indian Rupee Short Term Outlook:
Current Resistance: 74.6700
Current Support: 74.4000
High Target: 74.8000
Low Target: 74.3500
