Last Updated : Dec 23, 2019 11:42 AM IST | Source:

Subdued moves in USD/INR expected; traders can opt for bear call spread

In the current truncated week, ongoing pullback rally is likely to be abated as we have approached the upper band of the trading range.

Moneycontrol Contributor @moneycontrolcom
Representative image
Representative image

Rudra Shares and Stock Brokers

USD/INR bounced back from support levels in the week gone by and closed with weekly gain of 0.33 paisa at 71.12. Since last week, we have been maintaining bullish stance and expecting the pullback in the currency pair. The pullback theme has worked out pretty well and demand from lower levels has been witnessed.

After forming bullish engulfing candlestick pattern near the support levels, active participation of bulls has been witnessed and resulted in sharp pullback in currency pair. Oversold momentum indicators have played their part and settled in neutral zone after a mild recovery. Now, pullback is likely to mature soon and we could go again through the sideways movement in the coming days.

Image123122019USD/INR SPOT DAILY

In the current truncated week, ongoing pullback rally is likely to be abated as we have approached the upper band of the trading range.


'Bearish Harami' candlestick pattern at the resistance level is suggesting that traders can expect subdued movement in the coming days with slightly negative bias. In recent fall, the currency pair has moved far away from its 20-day moving average and it was one of the major reasons of pullback as 20-DMA acted as equilibrium for the prices in the short term.

On Friday, 20-DMA has been tested and a bearish candlestick pattern was formed, suggesting that bulls are skeptical about further up move. Traders should maintain negative bias until the currency pair is trading below 71.30 as prices are facing resistance at cluster of medium-term moving averages and expect the levels of 70.70 and 70.55 on downside again.

Trading Strategy

Subdued move is expected in current truncated week with negative bias. Though the chances are quite remote but any move above 71.30 could negate the selling setup and it has to be taken into consideration while forming a trading strategy.

Hence, looking at overall setup we believe traders can go for 'bear call spread' where out the money call option can sold to gain theta decay and higher strike price out of money call option can be bought as a stop loss. In this case, traders can go short in 71.25 CE at 0.1275 and Buy 71.75 CE at 0.0325 of 27th Dec contract. Strategy would enable the traders to gain the net premium 0.095 paisa.

Note: Option prices as on December 20, 2019 closing basis.

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First Published on Dec 23, 2019 11:42 am