Rupee likely to see sideways move with positive bias this week

Rudra Shares and Stock Brokers

USD/INR traded in a narrow range throughout the week and closed almost flat at 75.57.

After a bullish breakout, the currency pair went back into the consolidation mode where no major movement has been witnessed in the last few days.

Though some amount of profit booking has been witnessed from higher levels but the medium term trend is still intact and favouring bulls only.

Prices on the weekly chart is trading with higher top and higher bottom formation and momentum indicators are trading in a fairly bullish zone. The rounding bottom breakout in the weekly time frame is suggesting the target of 80 in the medium term which is still pending. Though short term volatility will not be ruled out and minor corrections would be inevitable.

In the short term also, bullish bias is still intact and the recent scenario is appearing to be an inevitable phase of consolidation in an ongoing uptrend. Prices are trading above significant medium term moving averages ribbon and formed a bullish candlestick pattern on May 8’s trading session.

The scenario is providing dual confirmation that bears have not entered in the game yet and this phase of consolidation could eventually result in a fresh leg of up move.

USD/INR daily

RSI has made a range shift from bullish zone to the sideways zone but not entered in a bearish territory in the recent correction suggesting that up move is likely to resume again in the coming days.

Traders can use any dip as a bailout buying opportunity until the above mentioned support levels hold. The trading range for the upcoming week is expected to be from 75 to 76.5 with the slightly positive bias.

Trading strategy

Considering the overall setup it’s quite evident that bulls are still having an upper hand. Traders can adopt a simple “bull put spread” with mild modifications and can initiate short positions in ATM put option and simultaneously create long positions in OTM put option in the ratio of 1:1.

Buy 75.00 PE at 0.0800

Strategy would provide maximum gain of up to 0.1725 paise with limited risk.

Note: Option price resembles the closing price as on May 8 of May 15 contract.