The US dollar fell during the month of May against the Indian rupee, which should not be a huge surprise, as we have seen the US dollar fall in general. However, near the ₹72 level, there is a major area that will come back into the fold, as it has previously been massive support and resistance. The fact that we are closing out the month of May at the very lows of the month does suggest that we may try to break down below it.
That being said, if we do break down below the ₹72 level, it is likely that we could go down towards the ₹70 level, which is a large, round, psychologically significant figure and an area that would attract a lot of attention, as it was previous support. I do think that the next couple of weeks will determine where we go for the longer-term move, so I expect that the month of June could be rather choppy when it comes to emerging market currencies, including the rupee. Nonetheless, we might have a nice longer-term setup showing up, but I think that the ₹72 level almost certainly has to be tested in order to gain real confidence in one direction or the other.
This will be a major look at the overall health of the economy and growth globally. However, India has a major problem when it comes to the coronavirus right now, so it comes down to whether or not traders are going to look through that potential issue. I believe that this pair will be very choppy over the course of the month due to the fact that it is not only summertime, but people are starting to look at various parts of the world through different prisms. I think that the overall attitude of the US dollar is going to be the biggest driver here though, because it has fallen during the last month while we have gotten almost nothing but bad news out of India from the virus. The fact that we still continue to see strength in the rupee against the US dollar tells me just how weak the US dollar is. As far as trading is concerned, I will either see a bounce that I will buy, or on a weekly close below the ₹72 level I will be looking for a move towards the ₹70.50 level. It is worth noting that you can also look at this potentially as a descending triangle.
