We are currently “risk on” from a long-term standpoint, but we have had a bit of a bounce due to the US dollar gaining via stronger interest rates.
The US dollar initially rallied during the trading session on Monday to kick off the week against the Indian rupee. However, the market has seen a bit of resistance above near the 50-day EMA, which is currently trading at the ₹73.66 level. Above there, the 200-day EMA sits at the ₹73.83 level. Both of those could offer a bit of resistance in what to me looks like an attempt to break down the US dollar against multiple currencies, not just the Indian rupee.
We have seen a certain amount of US dollar selling overall, with the US Dollar Index cracking below the 90 handle at one point, but we have turned around to show signs of support. Nonetheless, we are starting to see the greenback struggle overall, and given enough time, it is a scenario in which the US dollar will continue to suffer at the hands of the stimulus package coming out the United States. The market has been bouncing around between the ₹73 level on the bottom and the ₹75 level above, with the ₹74 level being in “fair value.” The moving averages dropping below there does suggest that perhaps we are going to see selling pressures pick up a bit, so if we can break down below the ₹73 level, then I think the market could go down to the ₹73 level next.
The Indian rupee represents emerging markets, and perhaps even more importantly, Asia. India has a rapidly growing and dynamic economy that a lot of people equate with the idea of global growth. In the same vein, we also look at emerging market currencies such as the Indian rupee as a dynamic sign of whether or not we are “risk on”, or if we are “risk off.” We are currently “risk on” from a long-term standpoint, but we have had a bit of a bounce due to the US dollar gaining via stronger interest rates. This is a temporary phenomenon, so given enough time it is very likely that the greenback will give back its strength, and that means that emerging market currency such as the Indian rupee and some of its others like the Brazilian real should continue to strengthen. I like fading short-term rallies, but I recognize it is probably going to be choppy to the downside.