USD/INR: Knocking On Channel Top Once More

USD/INR remains well bidded despite the latest restrictions set by RBI against Foreign Institutional Investors (FIIs) transactions, with speculators and arbitragers buying on dips. This bullishness is reflected last Friday, when USD weakness from last Friday’s NFP bearish surprise managed to push price below 61.0 temporarily, but recovered almost immediately, underlining the strong underlying bullishness of USD/INR right now. Early Asian trade showed more of the same, with prices heading higher immediately from open, almost hitting 61.30 this morning.

Weekly Chart
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Currently price is trading slightly lower, dipping below today’s opening levels. This is not exactly surprising as bullish advances has been rather limited post RBI’s non-action last Tuesday. Prices has yet tested the 61.45 swing high, and the latest early session rally failed to hit last Friday’s high either, suggesting that the Channel Top overhead bearish pressure is strong even in the light of recent bullishness. From a technical perspective, Stochastic readings does not suggest that a bearish cycle may be occurring soon considering that the Stoch line has just crossed the Signal line from below, after bouncing from the 80.0 line in the sand. This hints that bullish momentum is still ongoing, and traders seeking a move back towards Channel Bottom may need to be patient and wait for a stoch move back below 80.0 for a stronger bearish confirmation. Preferably price would also be below the recent swing low of 58.75 when the Stoch confirmation has been established.

The fundamentals of India is clear – Indian economy is going down the pits, with inflation rates hitting double digits and high unemployment rate. There is no quick fix against such dire situation, while RBI isn’t doing anything, or rather unable to do anything of significant to reverse the decline. Therefore, the USD/INR uptrend may be continuing for a while more, and even in the event of USD weakening on less tapers fears/worsening US fundamentals, it is likely that the gulf between US and India economic strength will pull through and send USD/INR eventually higher.

What does this all mean?

Even in the event that technicals signal a bearish indication, traders should still be aware that any soft interim supports may see significant bids coming through. As such, this makes a bearish movement much harder, and traders expecting a quick return to Channel Bottom without a shift in fundamentals may end up feeling disappointed.

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