USD/INR – Moving Towards 61.3

Rupee continues its weakening trend against the Greenback today even though markets are closed for local holiday. Prices opened at 60.45 but is currently trading at 60.7 right now, pushed higher due to overall risk-off flow that drove USD higher. USD strengthened further due to China central bank PBOC setting the highest USD/CNY parity rate in 2014, compounding the misery for Rupee.

Unfortunately for Rupee, it seems that the USD strengthening narrative isn’t going to go away anytime soon. Armed conflict in Ukraine appears to be likely as there is no hint of Russian supporters surrendering their arms by the time the ultimatum issued by the Ukrainian Government is over, with the new President saying on television that there will be full counter terrorists operations to disarm these dissenters forcefully. To make matter worse, Russia is reported to have amassed 40,000 troops along Ukraine’s border, implying that they are ready to intervene if necessary which may lead to a full blown war.

On the market sentiment front, Asian markets were actually broadly bullish today, but this bullishness is not shared with the European counterparts, suggesting that global sentiment may still be extremely bearish. Should global stocks continue to slide lower, the chances of USD strengthening becomes higher and so will the upside risk for USD/INR.

Looking at price action, Stochastic curve is pushing higher and at the verge of giving a bullish cycle signal, supporting the scenario for prices to test the 61.3 resistance at the very least and opens the door for a move towards 63.3 or even Channel Top. This is also possible given that Rupee appears to be inherently weak now. Even though early election polls suggest that market favorite BJP party is expected to win the election, neither Rupee nor Sensex managed to strengthen nor outperform fellow Asian currencies/indexes. As such, there is a strong possibility that prices are actually bearish due to “buy the rumor, sell the news” behavior and that if true would mean that Rupee will lose one of the major bullish driving force in 2014, condemning it to weaken further against USD in the following weeks.

More Links:
WTI Crude – Bullish Momentum Stalling At 104.0 Resistance
Gold Technicals – Marching Towards 1,330 On Sound Of Ukraine Unrest
US10Y – Yields Falling But Long Term Demand Expected To Fall

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