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USDINR - Indian Rupee - Breakout

USDINR - Indian Rupee - Breakout

Research, Research Team

The greenback closed higher by 1.65% week- on- week, at Rs. 62.6800, versus the Indian rupee; capping two weeks of negative closes.

The near- month futures added Rs. 1.0850, to end the week with gains of 1.76%. Volumes on the front- month January futures rose to 4.45 million contracts, up from 3.7 million the previous week, while open interest stood at 339,090 contracts, down from 528,000 contracts, the earlier week. In economic data, the Reserve bank of India; the country’s central bank, hiked the repo rate by 25 basis points to 8.00% today; surprising markets after a Reuters poll last week predicted the rates to be unchanged.

In its policy statement, the central bank said that further hikes were unlikely if inflation eased to a more comfortable level. The consumer price index (CPI), seen as the key gauge of inflation, rose at an annual rate of 9.87% in December.

The Indian rupee and the stock markets slumped to multi- month lows after the news, before recouping most of the losses for the session.

Technical view- Spot USD/INR

The US dollar ended the session on Monday with gains of 0.67% versus the INR, closing the third successive session with gains.

The gains are likely to extend to INR63.7500- 64.0000; top end of the channel plotted from the highs of November 2013, where the pair is likely to face some selling pressure. However, close above the resistances, the rally should continue to INR 64.7500- 65.0000, where the near term highs are likely to be capped.

Daily chart- Spot USD/INR

usdinr_indian_rupee_breakout_body_x0000_i1025.png, USDINR - Indian Rupee - Breakout

Comparison with major indices-

usdinr_indian_rupee_breakout_body_x0000_i1026.png, USDINR - Indian Rupee - Breakout

Supports for the week are placed at INR61.4000- 61.8000; trend line drawn from the lows of September 2013 and connecting the lows of January, this year.

The medium to long term view remains bullish in favor of the greenback with the pair likely to target INR67.5000- 74.5000

Trade ideas-

The USD/INR pair is likely to oscillate in the INR61.5000- 65.0000 range, for the week. Look to short the pair on rallies beginning from INR63.7500- 64.0000 up to INR64.7500- 65.0000

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.