Re gyrating in wide range on volatile USD, crude oil prices
Home currency has been oscillating between 77.98 and 81.95 in last 12 months
image for illustrative purpose
Hyderabad Indian rupee (INR) is reeling under pressure from global headwinds as the home currency already lost five per cent y-o-y to the Greenback during the past 12 months. The INR was quoting 81.91/USD in the inter-bank forex market on Friday (June16) from 77.98 on June 16, 2022, and 1.01 per cent lower from 82.75 on December 31, 2022. Technical charts indicating a limited downward movement for the home currency. The rupee fell about 1.12 per cent in May, its worst monthly fall since December 2022 as the local unit fell by 0.92 paise to 82.67 May 31 from 81.75 on April 30.
Indian rupee appreciated further by 30 paise to 81.95 as against its Thursday closing of 82.25. Greenback becoming stronger overseas and a negative trend in domestic equities are major factors that keep pressure on the Rupee. More or less, it’s assumed that the rupee is stable despite a drop in the Chinese currency yuan, which pulled other Asian currencies lower and boosted the US dollar.
On the other hand, dollar inflows into equities over MSCI Index rebalancing helped offset the negative impact of Greenback’s strength. Otherwise, analysts opine that the Indian currency would have declined to below 83/USD level. Further, foreign banks were offloading dollars.
Shifting focus to the USD/INR pair, it recently underwent a notable reversal after encountering substantial resistance in the range of 82.90-82.95, marking a respected multi-month high, observes Tapish Pandey, research analyst at SMC Global Securities Ltd.
“Currently, the INR-USD pair is trading below important short-term moving averages, with the 5-day EMA crossing below the 21-day EMA, signaling a downward trend in the near future. Moreover, the pair has broken down from a consolidation range near 82.35, further confirming the prevailing bearish sentiment,” Pandey tells Bizz Buzz.
Given the present downtrend and the restricted downside potential along with the presence of a significant support zone, it is anticipated that the USD/INR pair will trade with a negative bias in a sideways manner. However, once the pair reaches the mentioned support zone, it is likely to enter oversold conditions and deviate significantly from its mean levels, represented by the 5-day EMA currently near 82.20. Consequently, a potential reversal and bounce back toward the mean levels can be anticipated.
“Considering technical indicators, the 14-period Relative Strength Index (RSI) currently stands at 35, just above the oversold threshold of 30. This indicates that the downside potential for the USD/INR pair may be limited. Looking ahead, a significant support zone is expected around 81.71-81.73, coinciding with a major swing low observed in April and May this year,” added Pandey. The US dollar index continued its downward trajectory, remaining below the 102 mark for the third consecutive week.
Trading Sideways With Negative Bias
l US Dollar Index declines as other central banks tighten measures
l USD/INR pair reversal after encountering resistance
l Technical indicators suggest limited downside potential
l Significant support zone expected at 81.71-81.73
l Potential reversal and bounce back to mean levels expected
