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USD/INR seen at 62.73 in next couple of weeks

USD/INR seen at 62.73 in next couple of weeks

2014-01-24 21:48:00
Research, Research Team
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Main Points

  • Bullish reversal expected in USD/INR
  • Tough resistance seen around 62.00
  • The pair is very likely to extend gain up to 62.73, thus printing a higher high
  • Indian central bank is expected to keep interest rate unchanged on Jan 28
  • FOMC may go for back to back tapering in January meeting

USD/INR was closed at 61.61 on Friday with a hammer sign originating from 200 Daily Moving Average (DMA) which is considered a good indication of bullish reversal.

The pair is likely to find a tough resistance around 62.02 which is a triple confluence zone because 38.2% fib level, 100 DMA and 55 DMA all are sitting in around the same level. It is also very close to psychological level 62.00. Moreover the level also joins upper trendline resistance. All these factors make it a very strong hurdle for bulls as shown in following daily chart.

usdinr_indian_rupee_body_Picture_2.png, USD/INR seen at 62.73 in next couple of weeks

A break and close above 62.00 handle may push pair into relatively stronger bullish momentum targeting 62.38, 50% fib level and then 62.73, a very major resistance due to couple of reasons. First 62.73 is 61.8% fib level and second it is the first notable resistance above previous wave’s swing high. On downside, support is seen around 61.35 i.e. 200 DMA ahead of 61.00, psychological level and only notable level near to previous wave’s swing low.

As per swing analysis I see USD/INR at 62.73 during next couple of weeks as shown below;

usdinr_indian_rupee_body_Picture_1.png, USD/INR seen at 62.73 in next couple of weeks

As you can see pair printed a Higher Low [provided bullish reversal is on) so now a Higher High is very much likely according to typical wave behavior.

Fundamentals also highlight the downside risk in Indian currency just as technicals indicate. Central bank monetary policy meetings are going to be held in both India and the United States on Jan 28. Interest rates are likely to be kept unchanged by both the central banks. However, there are bright chances that Federal Open Market Committee (FOMC) may decide yet another tapering in monthly bond purchase program which is now worth $75 billion per month. The decision is expected after a sharp fall in December jobless rate that was stood at 6.7% in December, the lowest level since recession engulfed the US economy in 2008. Inflation also remained well below Fed 2% target last year.

Earlier the Indian Rupee had nosedived to 69.14 against greenback, an all-time low level, in August last year due to concerns that the US central bank may scale back stimulus earlier than previously thought. Indian currency, however recovered sharply due to emergency measures taken by the Reserve Bank of India (RBI) and its tight monetary policy stance.

Despite above mentioned measures analysts still believe that Indian Rupee will remain vulnerable against American dollar throughout the course of current year amid account deficit situation, pessimism about economic growth of the Asian nation, and reduction or a complete end of monthly asset purchase program by the US central bank this year which may strengthen the US dollar.

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