The US dollar kicked off the Friday session by selling off against the Indian rupee but then turned around to recover some of the losses. At this point, the market seems to be very comfortable hanging around the ₹77.50 level, an area that we have been bouncing around for the last couple of weeks. It’s worth noting that the market is at the very highs, so I do think that it is probably only a matter of time before we break out.
The pullback at this point should be thought of as a potential buying opportunity because what I find interesting in this pair is that although the United States dollar has struggled over the last couple of weeks, it has not done so against the rupee. This shows just how weak the Indian rupee is, because if it could not take advantage of the last couple of weeks, it probably does not have much hope at all.
I believe it is only a matter of time before we go to the ₹78 level, but I think we will even get as high as ₹80 over the next several weeks. The ₹77 level underneath should be supported, assuming that we even get there. The 50-day EMA is sitting at the ₹76.6 level and rising, which should offer quite a bit of dynamic support as well. The market has been very bullish for quite some time, so the fact that we are going sideways is not a huge surprise, as we are trying to work off some of the recent rally froth.
It’s not until the pair drops below the ₹76 level that I would consider shorting, and even then, I would have to see the US dollar falling apart against most things, not just this currency. Because of this, this is essentially a “long-only” type of market, so I’m not even looking at short selling opportunities at this point. If the US dollar starts to pickup strength against the currency markets in general, then I would expect this market to really start to take off. In fact, I will be keeping an eye on this market right along with some of the Forex majors, as it could give us a bit of a “heads-up” as the West about to happen over here. Emerging market currencies continue to look soft in general.
