We expect INR would be on appreciation mode in upcoming week and may touch the level of Rs 70.75.
Rudra Shares and Stock Brokers
Last week's initial up move has fizzled out at higher levels, and USD/INR has closed with marginal gains on weekly basis. The breakout on an upside has failed, and the currency pair has once again entered a trading range. The 'Dark Cloud Cover' candlestick pattern on daily chart suggested that bulls were not strong enough to take the rally forward, and traders could go through the phase of consolidation again for some more days.Though the trend is missing, the base of currency pair has shifted upward. The initial base of Rs 70.38 has now shifted to Rs 70.65. The medium term moving averages has now started trading with positive curve and likely to provide support to the prices on every dip. As per Fibonacci retracement, 50 percent retracement level of the latest swing move has been traded on the higher side. Now, 23.6 percent level is likely to act as a support which is placed at Rs 70.78.
The new trading range for the coming days is likely to be Rs 70.65 and Rs 71.75. The RSI on the daily chart is still stuck in a sideways zone, and directional indicators are not providing any signal of trending move. Bias is likely to be on an upside as price pattern, suggesting that the currency pair is going through the base building process and probable cup and handle pattern is in the making.
Fundamentally, three back to back positive indicators last week, i.e. narrowed Trade deficit, life time high Forex reserve and FIIs buying, gave strength in INR when it was in falling zone. Trade Deficit, which was at a seven-month low of $10.86 Bn for September, provided cushion for curbing Current Account Deficit, much required for the government because they are already facing challenges in other macro indicators i.e. fiscal deficit and GDP.
Also, FIIs turned positive last week towards the Indian stock market, resultant continuous buying for the last few days. Hence, we expect INR would be on appreciation mode in upcoming week and may touch the level of Rs 70.75.
This week, traders may short Future at Rs 71.20 and sell two lots of Rs 70.75 PE at 0.0425 against it
Note: Future and option price as on October 18 closing prices.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.