Bullish continuation pattern in USD/INR suggests rupee could move to 78-78.6

Rudra Shares and Stock Brokers

The roaring uptrend in USD/INR was going through the phase of consolidation for the last few days. It seems bulls were taking a breather and preparing themselves for the road ahead which eventually resulted in a bullish continuation pattern breakout on the daily chart. Currency pair closed at 76.55 on Friday’s trading session with the gain of 0.68 paise on a weekly basis.

The convergence of short-term moving averages and consolidation of prices near the 20 DMA indicates that the currency pair is poised for the big moves in coming days. Almost all up moves go through the phase of consolidation, correction and then reiteration, the same pattern is shaping up in the currency at current levels which could propelled the prices towards the level of 78 and 78.6 in a short term.

Momentum indicators are trading in a bullish zone and positive reverse divergence has also been witnessed which usually indicates the reversal after retracement. The short-term base has further shifted upward at 75.5 which would continue to provide cushion to the bulls on any dip.

USD/INR DAILY

Further taking a bird eye view into consideration it's quite apparent the bulls are having a tight grip as rounding formation breakout is in action and much higher levels are expected in the medium term. Dealing with short term inevitable consolidations and corrections are imperative but those who want to participate in rallies for the higher targets need to be in the trade amid all possible thick and thin.

USD/INR WEEKLY

Medium-term base is still intact at 74.50 and any dip above this level will provide bailout buying opportunities to the traders. Trading in currency is quite different as compared to equities as the central bank itself acts as an active market participant in it. The Reserve Bank of India often intervenes from time to time to maintain balance of demand and supply as steep depreciation in INR would fosters the negative impact on the country's imports.

This process usually shifts the currency pair on the sideways zone and acts as a barrier in one way move. In the medium term, the target of 79.5 and 80 are expected but the short term correction will not be ruled out time to time.

Trading Strategy

Considering the overall scenario it's quite apparent that bulls are having an upper hand and a bullish continuation pattern could provide fuel for further up move. The current setup demands a trading strategy that could capture the expected upside with limited risk. Hence, simple 'married Put' can be initiated.

Buy USD/INR future at 76.66
Buy USD/INR 76 PE at 0.0575
Profit booking range 78 - 78.6
Maximum profit 1.8825

Maximum loss 0.7175

Note: Option premium mentioned resembles the closing price as on April 20 of April 24th contract.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Time to show-off your poker skills and win Rs.25 lakhs with no investment. Register Now!