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Last Updated : May 16, 2019 09:51 AM IST | Source: Moneycontrol.com

USD-INR: Some roadblocks ahead for rupee

The bounds for the next quarter would be in the range of 68.40 to 71.60 where we can expect the INR to trade in.

Moneycontrol Contributor @moneycontrolcom

Raja Venkatraman

The Indian rupee has been moving in line with our estimates. The mention that “ ...we could be looking at the USD-INR to move towards 71 and 71.60 in the next few weeks. We advocate to engage in trading as well as introducing a hedge against a weaker rupee…” proved to be quite timely as we are nearing the first target zone.

A surge in global oil prices spooked the rupee. With currency waivers issued to India expiring earlier this month, there is a certain panic set into the system that has made the rupee weaker.

Elevated crude prices could widen the country’s current-account deficit and stoke inflationary pressures. RBI meanwhile is attempting to inject liquidity into the system by engaging in long term foreign exchange buy/sell swap. While the effect could be a little delayed, the foreign exchange reserves are definitely getting dented.

Capture (1)

On the charts too the price action has been clearly suggesting a gradual and measured rise ahead of the key event, the results of the general elections next week.

The financial markets in India have already started reacting and volatility is definitely stepping up. With Fibonacci supports seen on the charts clearly supporting the weakening over the last few weeks, the breakout of the trendline which we had showcased last week triggered some sharp rise.

On the lower panel we see that the ADX /DMI setup is also getting set for some trended action . With negative DMI line inching higher, we need to see if the rupee moves beyond 71 for fuelling further rise towards anticipated level towards the next value area resistance around 71.60. At the moment rupee could take a breather at 71 till some triggers are visible.

As we step ahead into a volatile market scenario for the next few weeks, we need to approach the market from a trading perspective too.

The bounds for the next quarter would be in the range of 68.40 to 71.60 where we can expect the INR to trade in.

With INR approaching the upper end of the range one can begin to tone down the hedge one these levels are reached and step into trading. In the meantime, the global cues shall give us some clarity on how to position our selves once the dust settles on the election results.

This is the line of approach we have been maintaining in our engagement with the markets be it currency or equities. The key is on how we develop a perspective and engage with the market.

We have a NeoTrader approach that has been quite helpful in the current market conditions to give us some cues on the direction of the market. Volatility shall only step up but then if you are empowered to see through the chaos you can hold on to your analysis.

(The author is Head of Training at Chart Advise)

Disclaimer: The views expressed in this article are that of the author and not of moneycontrol.com or its management.
First Published on May 16, 2019 09:51 am
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