The past week of trading had two significant events propel USD/INR action and offer an opportunity to day traders and financial institutions to take advantage of improved sentiment. Calm has prevailed in the Middle East conflict and this has created some light regarding mid-term outlooks, which has certainly amplified momentum in the broad Forex market and influenced the USD/INR. The addition of weaker USD centric attitudes has also created some downwards momentum in the currency pair, but now day traders and large players must decide what is next for the USD/INR and that is a complex question.
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Near-Term Conditions Versus the Long-Term USD/INR Trend
The past week has seen financial institutions react to the U.S Federal Reserve’s new leadership in a pro-active manner. While narrative regarding the intentions of the U.S central bank remain hard to figure out for many analysts, there is no denying that since late Thursday of last week sentiment has shifted regarding the USD, the impact on the USD/INR is clear technically. However, the biggest impetus may have come from the sudden change in stance via the U.S White House via its decision to pursue negotiations with Iran.
The lack of heightened military escalation in the Hormuz Strait has created tranquility in the energy markets and this has translated into global financial institutions feeling as if they can trade without dark shadows hovering. The USD/INR has now entered lower terrain not seen since the first week of July. Traders have a hard technical puzzle to question their perceptions regarding the ability of the USD/INR to continue its recent trend lower, or pursue reversals based on long-term characteristics in the currency pair.
Selling Bursts Often Give Way to Bullish Buying
As of this writing the USD/INR is within sight of the 95.20000 ratio depending on the bids and asks. One week ago the 96.7000 level above may have felt a more likely target to speculators in the USD/INR. The shift in sentiment in Forex has been strong and USD centric selling started to take hold last Friday and saw more impetus emerge this Monday.
The USD/INR gapped lower on Monday’s opening below the 96.2500 ratio and continued to selloff creating a low yesterday around 94.9200. Intriguingly and creating a complex mix of technical questions at this juncture is whether or not the USD/INR can still create sustained momentum downwards. Yes, the USD/INR has moved lower before in sustained bursts. However, bursts is the important word. Meaning that selling action in the USD/INR while showing strength periodically is often met with additional moves higher, thus creating its long-term bullish trajectory.
What Historical Patterns Suggest About Current Conditions
Speculators with limited funds may find themselves in a precarious decision making phase regarding pursuit of the USD/INR. Recent selling has been efficient and the temptation to believe lower WTI Crude Oil prices could create additional positive sentiment to generate because of inflation fears eroding is crucial – which in theory could help the USD/INR continue to create more momentum downwards.
Yet, consideration of government policy and economic conditions in India merit taking the long-term trend upwards in the USD/INR seriously too. The question is when buying will start to outweigh selling again, because from a historical perspective until proven otherwise it may be unwise to bet against the more dominant evidence. It remains difficult for day traders to wager on the USD/INR and current conditions may make it more dangerous than normal.
Large Traders Continue to Remember USD/INR's Upward Crawl
While traders may legitimately be keen on looking for more downside in the USD/INR, 95.0000 should be looked at as a barometer, in fact the 95.2000 could be a gauge for support. If price action remains sustained above the 95.2000 and WTI Crude Oil remains above $74.00 and $75.00, this may mean financial institutions are showing signs of caution and are not allowing speculative optimism to seep too far into their outlooks. While it is tempting to believe risk appetite will remain strong (and it might) the knowledge that an upwards crawl in the USD/INR has been a force for the past five years is not going to suddenly fade from the memory of large currency players.
Federal Reserve Uncertainty Continues to Test Traders
Short and near-term retail speculators should be careful with the USD/INR. The momentum generated downwards the past week has been noteworthy, but the currency pair remains in a vulnerable position regarding potential influences. Yes, the USD/INR is near values seen in early May of this year, but financial institutions may look upon current values as durable support and re-ignite moves higher. While downside bets may feel adventurous, risk taking tactics should be practiced responsibly.
USD/INR Levels to Watch
Current Resistance: 95.2600
Current Support: 95.2010
High Target: 95.4500
Low Target: 95.0010
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