The overall scenario is suggesting that bullish bias should be maintained by the traders and limited upside can be expected as the currency pair is bouncing back from the support levels.
Since the past two weeks, we have been maintaining our cautious stance in USD/INR. The four days of continuous fall finally abated near support level on December 13 and the currency pair closed with the loss of 48 paise at 70.8 on a weekly basis.
A few days back, we have witnessed false breakout in the currency pair and since then, it has been trading with negative bias and locked in a wide trading range. Decent correction from the higher levels has been priced in and the currency pair is now again trading near the support levels.
In the upcoming week, we can expect a pullback from current levels as a bullish candlestick pattern that has been formed on Friday’s trading session near the support area called ”Bullish engulfing”, suggesting that demand at lower levels has emerged and the ongoing fall is likely to take a pause.
The medium-term support level is still intact at 70.35 and in the next few trading sessions, we could see the prices trading in the range of 70.35 to 71.30. Though a pullback is expected, the upside seems to be limited. The resistance level has now shifted downward as the currency pair is trading below all major medium term moving averages, which will act as a hurdle on the way up.
The levels which were earlier acting as support will now act as a resistance. On intraday charts, the upside momentum is building up. RSI has shown a range shift and moving in the sideways zone from bearish zone.
The overall scenario is suggesting that bullish bias should be maintained by the traders and limited upside can be expected as the currency pair is bouncing back from the support levels. The overall medium-term structure is still positive until it’s trading above 70.35.
Positional traders can maintain a closing basis stop loss of support level as there is a gap on daily chart and fall is likely to extend if support level breaks. Though, the chances are quite remote in an upcoming week.
As we are expecting a pullback this week where the limited upside is expected, traders can go long in the futures of USD/INR at 70.9175 and hedge the positions 3 calls of 71.50 can be Sold of 20th December contract.
(The writer is Senior Research Analyst Rudra Shares & Stock Brokers)Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.