Weekly chart indicating that medium-term trend is sideways but bulls are having a firm grip as prices are trading above all short-term and medium-term moving averages.
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USD/INR traded with a positive bias throughout the week, the initial minor dip was bought into and the currency pair closed almost flat at 71.52 per US dollar. We have been maintaining sideways stance with slightly positive bias since last week as the bullish scenario of the month of Dec -Jan seems to be repeating itself. Top bottom approach suggests that bulls are having an upper hand and the next leg of rally is likely to be on an upside.
Monthly chart is going through a phase of retracement and consolidation after testing the life time high in the year 2019 and taking support of 20 month simple moving average.
Weekly chart indicating that medium term trend is sideways but bulls are having a firm grip as prices are trading above all short-term and medium-term moving averages.
When it comes to extremely short term, daily time frame looks quite subdued but latent signals for bulls are quite apparent as short-term and medium-term exponential moving averages have started to trade with positive curve after a long phase of consolidation.
Apparently, the base for the currency pair is intact at 71.10 and buying on dips strategy needs to be adopted by the traders. In an upcoming week two scenarios are shaping up. Firstly, the sideways move could continue and the range of (71.10 - 71.65) will be respected. Secondly, the breakout might take place above 71.65 and the currency pair could propel till declining trend line resistance i.e. 71.95 and then 72.25 can also be approached.
Intraday chart suggesting that chances of breakout is quite high as momentum indicators have started trading in the bullish zone and Bollinger bands are trading with the setup of “band walk” indicating that volatility breakout is in action and price breakout could follow it.
USD/INR DAILY
Trading Strategy
Considering the overall scenario it’s prudent to adopt the trading strategy which provides return in the sideways market as well as being able to catch the probable breakout. “Bull put spread” can be initiated by traders where ATM put option can be sold to gain the premium and OTM put option can be bought to hedge the positions.
SELL USD/INR 71.5 PE AT 0.15
BUY USD/INR 71.25 PE AT 0.0475
Strategy would enable the traders to get the premium of up to 0.1025 paisa with limited risk and downside is protected with the long positions in put option.
Note – Option premium mentioned resembles the closing prices as on February 14 of 20th Feb contract.
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