The US dollar has been going back and forth against the Indian rupee over the last several days, as we are sitting just below the 200 day EMA. You can see that recently the market had shot straight up in the air to slam into the 200 day EMA as well, when sideways and then pulled back. It is worth noting that the 200 day EMA is drifting a bit lower, and it suggests that we are at least trying to make another move lower, but it is also worth noting that the 50 day EMA is trying to turn to the upside.
This pair does tend to be very noisy, as we have the occasional spikes like you see. This is a market that can be thin at times, so that of course causes this choppy behavior. The market has been drifting lower and it continues to find plenty of support near the ₹72.25 level, so the fact that the most recent high is little bit lower might mean that we are trying to break down through it. If we do, then it opens up a much bigger move to the downside, but we are a long way from doing that at the moment.
On the other side of the coin, if we were to break above the ₹73.66 level, then the market probably goes looking towards the ₹74 level, followed by the ₹75 level. As you can see, I have marked on the chart a couple of major levels and these are worth paying attention to. That being said, we have been drifting lower for a while so I think a lot of people have been using some of these emerging market currencies for yield more than anything else, and that may continue to be the case unless of course the yields in America continue to rise. That is going to be the easiest way to look at this pair, through the prism of yield differential. If it continues to shrink, that could send this US dollar higher, or perhaps if we have some type of major “risk off event”, which of course always favors the US dollar. That being said, as things stand right now it looks like fading rallies continues to work but we have some parameters where things could change as mentioned previously.