In the coming week, we could see the currency pair to trade in a particular range with slightly positive bias.
Manali Bhatia
As expected, USD/INR did not sustain at higher levels. Sharp bounce was seen after the September 14 drone attack on Saudi oilfields but the up move fizzled out near the resistance of 72 and again entered the sideways zone.
In the coming week, we could see the currency pair trade in a range with a slightly positive bias. On Friday’s session the USD/INR showed a smart recovery from lower levels after touching 50 Day Moving Average and ended with the “Hammer” candlestick pattern, suggesting that a mild bounce is likely in coming days.
The overall trend is still up as the currency pair is trading above all major medium term moving averages. One major point that needs the trader’s attention is the curve and expanded ribbon of medium term moving averages which indicates that prices are likely to form base at these levels.
70.55 were the breakout level for USD/INR in previous month and a sharp move till 72.4 was seen after breaking out of the level. In current correction, the same level of 70.55 will act as an important support level.
Relative strength index (RSI) is trading in sideways zone while declining slope of ADX suggests that a definitive trend is missing at least for the time being.
Momentum indicators on intraday chart suggest upward bias. The change in trend in the currency pair can be expected only once 70.5 trades on downside on closing basis. As there is a gap on daily chart in 70.1 - 69.7 range which could attract the bears if the support level gets breached.
Fundamentally, things seems to be in the favour of USD as Federal Reserve indicated possibility of no further rate cut this year. This will likely favour the greenback.
Looking at the overall scenario, we believe that, for now, traders can expect sideways move in USD/INR with positive bias and the trading range of 70.8 to 71.47 can be expected. So, accordingly traders can go long in USD/INR future contract at 71.01 and to hedge the positions 71.5 CE can be sold at 0.10.
The author is a Senior Research Analyst at Rudra Shares & Stock Brokers
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