The US Dollar Indian Rupee (USD/INR) pair pulled back on Tuesday as the Dollar retreated against major currencies from a two-month low. This comes right before the release of the minutes from the Federal Open Market Committee’s January meeting.
As of this writing, USD/INR has jumped more than 35 pips to 62.15 at 08:50 GMT in London. The pair is expected to break trendline resistance near 62.25. We have two major resistance levels above trendline resistance:
• First Resistance: 62.73
• Second Resistance: 63.16
On the downside, the pair is likely to find support near the lower trendline, which is currently around 61.70. Below the lower trendline, two major support levels are:
• First Support: 61.58
• Second Support: 60.86
The overall trend for USD/INR is bullish and will remain bullish as far as the price is above 61.32, the low of January 17th, 2014.
USD/INR - US Dollar Indian Rupee Daily Chart
Therefore, based on technical analysis, here is a strategy to trade USD/INR this week:
• Buy the pair if the daily candle closes above 62.37, target should be 63.17; close the trade if a daily candle closes below 62.00 handle
• Sell the pair if the daily candle closes below 61.32, target should be 60.80; close the trade if a daily candle closes back above 61.32.
A number of events are scheduled this week that might stir high volatility in the price of USD/INR. On Wednesday, the Federal Reserve is due to release the minutes from the FOMC’s January meeting, which will be a very high profile event. Investors are curiously waiting to uncover clues as to what stance the FOMC will take on future monetary policy decisions. Minutes from FOMC’s December meeting showed a very hawkish stance from policymakers. Many members were seen advocating for continuous tapering in the monthly asset purchase program so that the whole stimulus package could end in October this year. Similar views in the January meeting might trigger a strong bullish momentum in the US Dollar, and consequently, in the price of USD/INR.
The US Consumer Price Index (CPI) report, a major indictor for inflation, is scheduled for release on Thursday. According to the average forecast of different analysts, the CPI for the month of January remained steady at 1.5% as compared to the same period last year. However, CPI excluding Food & Energy Prices is expected to tick down to 1.6% in January compared with 1.7% in the corresponding period of the previous year. Generally speaking, a high reading (close to 2%) is considered positive for the economy, so better than expected CPI reports in January could spur a bullish wave in USD/INR.
Moreover, US initial jobless claims data, for the week ending on February 14, is also due on Thursday. Since tapering in stimulus is linked to positive outcomes from the labor market, so this job data could also stir volatility in the price of USD/INR. According to median projection of analysts the number of people who claimed unemployment benefits, during last week, declined to 335,000 from 339,000 in a week before. A better than expected outcome will be bullish for USD/INR.