Yesterday it was noted that the Indian rupee was strengthening against the USD more so than any other major currency. Similarly, Sensex was also faring much better compared to the rest of the other Asian equity index counterparts. However, today's surprising bullish risk sentiment which propelled all major Asian stock index higher has failed to have a similar impact on the rupee and Sensex.
USD/INR Hourly Chart" title="USD/INR Hourly Chart" width="978" height="614" style="font-size: 11px;">
To be fair, the rupee and Sensex did strengthened, but the degree of which is a shadow of what we've seen yesterday. Both currency and stock index has since given up a large portion of their paltry gains, with Sensex currently trading just 0.18% higher. Rupee fared much worse; the USD/INR is now trading higher than yesterday's closing level of around 61.33.
It is interesting to note that both Indian currency and stocks were doing better than the rest one day, only to have both of them performing worse the next. But this is the fickle nature of market sentiment when it's not supported by anything fundamentally substantial. Nonetheless, this doesn't really sound like bad news for either Stock or rupee buyers, as today's price action is simply a mean reversion of market to give back the gains that neither deserve yesterday when they outperformed. This would also mean that the USD/INR traders should not expect prices to shoot up much higher from here.
Technicals agree as well, with Stochastic readings likely to be within Overbought region should price test the 61.55 ceiling. As such, the higher likelihood is for prices to stay under 61.55 and above 61.1 floor following the bearish rejection off 61.55 - assuming that fundamentals remain as it is in the short-term.
USD/INR Weekly Chart" title="USD/INR Weekly Chart" width="977" height="615">
Long term chart continues to favor a weaker Rupee in the next few weeks or even months. Channel Top objective remains viable as long as price remain above 61.3. Stochastic readings agree with Stoch curve already close to Oversold region and may reverse soon (may be a few candles which may means 1 or 2 months later). This also fits with the overall fundamental narrative of India's economy which continues to remain soft compared to US's road to recovery - favoring a higher USD/INR in the long run. Not that this is important in the short-run though, as there isn't any immediate threat of price breaking the consolidation channel seen on the Hourly Chart.