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USD/INR Poised for Breakout through Daily Triangle

USD/INR Poised for Breakout through Daily Triangle

2014-02-07 17:18:00
Research, Research Team
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Main Points:

• Bias shall remain bullish as far as price is above 61.32

• Volumes are low ahead of US non-farm payrolls and jobless rate reports

• India once again lowered growth projection for current fiscal year to 4.7% - 4.9%

• Think tanks expect 11% depreciation in Indian Rupee during current FY

USD/INR on Thursday closed with a large bearish engulfing candle; however the pair faced rejection around channel support and gave daily closing at 62.28. At the moment of writing, USD/INR is being traded at 62.24 in the London session.

Immediate support can be noted around 62.14, which is the channel support and the 61.8% fib level as shown in the following chart. A break and daily close below channel support may target 62.00 i.e. the psychological level, the 100 Daily Moving Average (DMA) and the 55 DMA. Below the 62.00 handle, the next prominent support is sitting in near 61.81, the 76.4% fib level, ahead of the 200 DMA, which is currently around 61.70.

FOREX_USDINR_Poised_for_Breakout_through_Daily_Triangle_body_usdinrrupeedailypricechart.png, USD/INR Poised for Breakout through Daily Triangle

On the upside, an immediate hurdle can be noted near 62.46-62.50 that is the channel resistance and the 50% fib level. A break and daily close above the channel resistance shall target 62.62, i.e. the 38.2% fib level. More upside movement above 62.62 may expose 62.93, which is the 23.6% fib level and the only notable resistance before the swing high of the previous wave. Bias shall remain bullish as far as the pair is being traded above 61.32, the low of January 17th.

After hitting extreme overbought territory, the Commodity Channel Index (CCI) is approaching oversold region at the daily chart that shows a steep fall in price is not likely. The Relative Strength Index (RSI) is, however, neutral. No signs of divergence are being noted with MACD at any timeframe.

Last month we saw a steep fall in non-farm payrolls for December due to extremely cold weather. Conversely, the unemployment rate fell to the lowest level since 2008 to 6.7% in December, which was very close to the Federal Reserve’s 6.5% threshold. Consequently, the Central Bank trimmed its monthly asset purchase program by $10 billion to $65 billion in January.

Moments ago, India once again lowered the projection about the country’s expected growth for Fiscal Year 2014 (FY14). According to a report by National Council of Applied Economic Research (NCAER), the Asian nation is likely to grow at 4.7% to 4.9% during the current fiscal year due to the depreciation of the Indian Rupee (INR). Previously in November of last year, NCAER had lowered FY14's growth forecast from 5.9% to a range of 4.8% - 5.3%. Indian think tanks also expect around an 11% depreciation in the Indian Rupee during the current fiscal year, which is more than their previous estimate of about 9.5% depreciation. Moreover, fiscal deficit might also be higher than the budgeted 4.8% deficit, the report added.

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