News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Oil - US Crude
Bullish
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bearish
GBP/USD
Bearish
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • There’s a strong correlation between interest rates and forex trading. Forex is ruled by many variables, but the interest rate of the currency is the fundamental factor that prevails above them all. Learn how interest rates impact currency markets here: https://t.co/J0EPMD2Cfi https://t.co/ZDuee58Abe
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/BdgFmkRxVw https://t.co/niJL2W2yXV
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/Yl9vM7kO6a https://t.co/0rNbbrd58e
  • Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmits through to trend and trigger charts. Learn more about time-frame analysis here: https://t.co/9S5tXIs3SX https://t.co/zPzJAxBJxt
  • Emotions are often a key driving force behind FOMO. If left unchecked, they can lead traders to neglect trading plans and exceed comfortable levels of risk. Read on and get your emotions in check here: https://t.co/eILWbFgHRE https://t.co/uf6KEYTes5
  • There are three major forex trading sessions which comprise the 24-hour market: the London session, the US session and the Asian session. Learn about the characteristics of each session here: https://t.co/reRmDe1Ksp https://t.co/gRjdVfbg66
  • Implementing a trading checklist is a vital part of the trading process because it helps traders to stay disciplined, stick to the trading plan, and builds confidence. Learn how to stick to the plan, stay disciplined, and use a checklist here: https://t.co/SQUCCYRCIk https://t.co/mLLGqYUygY
  • Use this technical analysis pattern recognition skills test to sharpen your knowledge: https://t.co/Qgz89PTxnu https://t.co/HUYJzEkYiT
  • #Gold prices put in a major breakout last month and, so far, buyers have held the line. But a really big Fed meeting is on the calendar for this week. Can Gold bulls hold? Get your market update from @JStanleyFX here: https://t.co/NGRTSfceOW https://t.co/QkSUORIQE2
  • Struggling to define key levels? Floor-Trader Pivots assist traders in identifying areas in a chart where price is likely to approach and can be used to set appropriate targets, while effectively managing risk. Learn how to use this indicator here: https://t.co/Ye4m1FMKUW https://t.co/PHK2sqB1jV
Indian Rupee Gains May Not Last After Banking System Dollar Glut, USD/INR Eyes CPI

Indian Rupee Gains May Not Last After Banking System Dollar Glut, USD/INR Eyes CPI

Daniel Dubrovsky, Strategist

Indian Rupee, USD/INR, RBI, Coronavirus, Cairn Energy Plc, Technical Analysis - Talking Points

  • The Indian Rupee has been strengthening lately despite local coronavirus surge
  • Flood of dollars in India’s banking system amid tax dispute boosted INR yields
  • Rupee remains at risk, with USD/INR appearing to trade within a falling wedge

The Indian Rupee has been performing remarkably well in recent weeks considering India’s recent deadly wave of the coronavirus. Over 400,000 cases were reported earlier this week, a record. This risks pouring cold water on expectations of stellar economic growth. The International Monetary Fund recently estimated that the country could see a breathtaking 12.5% GDP growth rate this year.

It should be noted that while India is experiencing grim conditions, the rate of daily case growth has been slowing – see chart below. Having said that, the figures remain elevated. The Nifty 50, the nation’s benchmark stock index, remains unhinged all things considered. While prices have not sold off, the Nifty has been consolidating since January. What could explain the divergence between price action and Covid cases?

INR/USD, Nifty 50 Versus Indian Covid Cases

Indian Rupee Gains May Not Last After Banking System Dollar Glut, USD/INR Eyes CPI

For one thing, Prime Minister Narendra Modi has been reluctant to take drastic measures, such as a nationwide lockdown. He noted that states should only consider lockdowns as a last resort. Meanwhile, the Reserve Bank of India (RBI) just announced additional emergency measures to help support the economy. One of these items includes a second tranche of bond purchases totaling about INR350 billion.

The RBI also announced an ‘on tap liquidity’ window worth roughly INR500b to extend credit to health services and vaccine makers. Governor Shaktikanta Das noted that the outlook is highly uncertain and that the central bank stands in ‘battle readiness’. The central bank’s action is helping to pressure longer-term sovereign debt yields lower, keeping default woes at bay.

These may be keeping risk appetite intact, something that is important for the sentiment-sensitive Rupee. Having said that, USD/INR has been on a wild ride as of late. Last month, the pair soared amid a very dovish RBI monetary policy announcement that marginally cooled tapering expectations. Now, the pair is falling fairly swiftly. This could be due to a temporary glut of dollars in the banking system.

According to Bloomberg, the government told state-run banks to protect their dollar deposits due to a tax dispute. There is a concern that Cairn Energy Plc, a UK-based oil and gas exploration company, could move to seize India’s offshore assets following an arbitration ruling. As a result, state banks were holding back receiving USD in the forwards market, yields soared, benefiting the Indian Rupee – see chart below.

The RBI’s emergency measures seem to be cooling these short-term premiums, so the Rupee’s momentum could slow ahead as the nation remains in a vulnerable state. Ahead, India’s CPI report is due on May 12th. Elevated price pressures have likely been making it difficult for the central bank to reduce benchmark lending rates. Inflation is expected to slow in April to about 4.1% y/y from 5.5%. Still-elevated CPI readings could risk rekindling stagflation woes, especially if growth is vulnerable.

INR/USD Versus Rupee Forward Implied Yields

Indian Rupee Technical Analysis

USD/INR appears to be trading within a bullish Falling Wedge chart pattern. A breakout above could open the door to resuming February’s bottom. The broader technical outlook remains bullish, with the pair being guided higher by rising support from 2011. The 50-day Simple Moving Average (SMA) could reinstate the focus to the upside. Otherwise, closing under it could open the door to testing the long-term trendline.

USD/INR Daily Chart

Indian Rupee Gains May Not Last After Banking System Dollar Glut, USD/INR Eyes CPI

USD/INR Chart Created in TradingView

--- Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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

DISCLOSURES