On the 16th of December, the USD/INR was trading near the 76.4400 level as it made highs not seen since the middle of June in 2020. However, as 2022 draws closer, the USD/INR has been able to sustain a solid bearish trend the past two weeks of trading and the 74.5000 level has been penetrated lower. Not only is the USD/INR trading at a monthly low, but it is within sight of support around the 74.4000 level which could prove to be a serious inflection point.
Traders must understand the current transactional volumes within the USD/INR are lighter than normal due to many international financial institutions not participating in the markets over the Christmas and New Year holidays. Yet the ability of the USD/INR to stage a strong reversal downwards the past couple of weeks has not been met by a durable reversal higher. The USD/INR has a tendency to trend nicely and now that lower depths are coming into sight, speculators may be beginning to wonder if sudden higher moves will be generated sooner rather than later.
Certainly, it stands to reason the USD/INR was overbought a couple of weeks ago as nervous trading grew globally regarding the US Federal Reserve interest rate policies to come, and the Omicron variant of coronavirus making headlines. However, in the past five days of trading, before the Christmas holiday and early this week, the USD/INR has proven rather reliable as a selling opportunity.
Traders need to consider that there is a potential for sudden spikes occurring if a large trade takes place within the USD/INR that is imbalanced as light trading conditions are exhibited. But momentum traders should certainly keep their eyes on the 74.4000 level, because if this support juncture is broken and prices are sustained below, it is possible stronger selling could push towards the 74.3300 to 74.2500 levels which were traded in the middle on November.
Quick hitting trades may serve speculators best under the present conditions and speculators need to use risk management well to guard against the potential of fluctuations. Traders who are tempted to look for upside action and a test of resistance towards the 74.5000 levels cannot be blamed for this type of wager also. Trading appears to be on a downward slope for the USD/INR, but light trading could develop into choppy conditions.
Indian Rupee Short-Term Outlook
Current Resistance: 74.5750
Current Support: 74.3600
High Target: 74.7500
Low Target: 74.2200
