This is a market that I think will see a lot of choppy behavior, but right now in the short term, I think that the ₹74.5 level is going to be massive resistance.
The Indian rupee gained slightly against the US dollar as the Delta variant in India seems to be slowing down. The 50-day EMA sits just below, which could offer a significant amount of support. The 50-day EMA sits at 74.1, and there is going to be support extending down to the ₹74 level as well. That being said, it could offer a little bit of a lift, but if we break down below that ₹74 level, then it more than likely would open up a move towards the 200-day EMA.
The 200-day EMA sits at the ₹73.75 level, with the ₹73.50 level underneath offering another target. Keep in mind that the Indian rupee is an emerging market currency, so you need to see more or less a “risk on” type of scenario to make the Indian rupee look attractive. Beyond that, you should also keep in mind that there are a lot of noisy areas just below so I do not think that this will be an easy move.
On the other hand, if we get some type of ugliness coming out of the coronavirus in India or perhaps some major “risk off event”, then the US dollar will clearly be a major beneficiary, especially against emerging market currencies such as the rupee. However, you will see this across-the-board against the other major emerging market currencies such as the Brazilian real, Israeli shekel, South African rand and many others. In other words, it will be a huge move into the greenback in general.
This is a market that I think will see a lot of choppy behavior, but right now in the short term, I think that the ₹74.5 level is going to be massive resistance. In other words, I think that we have more or less a sideways market with more of a downward tilt in the short term. That being said, you could make a little bit of an argument for the market forming a “rounding top” if we break down below the ₹74 level, opening up a bigger move as this pair does tend to bounce around between ₹75 and ₹72. The Central Bank of India seems to be very happy keeping the market in this overall range.