USD/INR – Rising Channel Intact despite record highs

Weekly Chart

Despite trading to record highs and trading above Channel Top yesterday, prices actually pushed lower. This is even more impressive when we consider that USD actually strengthened on the back of fresh new taper concerns following Fed Evans’ seemingly hawkish stance. It seems that USD/INR bulls are concerned that RBI will step in and intervene via market action and/or policy changes soon, if history provide any indication. Furthermore, the initial rally yesterday which sent prices above 62.0 is not fundamentally supported, but was rather a speculative technical move. Hence, if RBI does intervene, it is likely that those speculators will not have enough bullish conviction to hold against RBI, allowing rising Channel to remain intact.

That being said, due to the long-term economic woes of the Indian economy right now, we should not anticipate a longer-term bearish USD/INR correction. Therefore, technical traders should not simply assume that a failure to break current Channel will equate to a move back towards Channel Bottom. Given current strong bullish momentum, there is every equal chance if not more, that prices will be able to straddle Channel top to trade higher. A bearish scenario will only become more likely should price break the 59.0 floor together with Stochastic readings pushing below 80.0.

Looking at market sentiment, it seems that bidding interest on short-term dips remain strong, and may continue to support prices moving forward. Market certainly favors a continued weakening INR. As such, we may actually find ourselves in a strange situation where any RBI intervention (which is unlikely to be adequate) will result in further weakening of the INR as market will bull USD/INR in the knowledge that the latest RBI intervention can do little to stem the Rupee tide.

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