July has provided a solid month of selling for the USD/INR and as August looms the currency pair is near important long term support. The mark of 74.5000 is within the sights of speculative operators as a crucial support juncture. The mark has held twice in past few weeks, but if it is tested again the third time could prove the charm for this inflection point and set off more downward momentum, and build on the bearish trend seemingly in place.
The USD/INR has seen an incremental decline in key resistance levels and the 75.5000 mark now looks like a solid point which could cause reversals if it is hit. The 75.6000 mark was touched in early July, but was not tested again as the 75.5200 became the latest high in the middle of July. A range between 74.4500 and 75.3000 has seen the brunt of the value action the past month. However, since July 20th the USD/INR has not traded higher than 75.0000.
Global risk appetite is a fundamental element for the Indian Rupee. The USD/INR now finds itself bouncing along important support levels not really broken lower since March. If the 74.5000 level can attain a thrust downwards and maintain its selling pressure the USD/INR could find itself testing important values below, but in order to achieve this direction risk sentiment needs to remain optimistic. Speculators may be asking themselves if more optimism can be found.
The Indian government has admitted that coronavirus continues to hit its population and that the infection rate is increasing in rural areas. The government has been transparent about the economic impact of coronavirus, but its total impact is still hard to quantify and this is the case for all nations, not only India. After issuing strong lockdown rules the government has begun to implement a strategic reopening of areas, but concerns still exists about the health of the population and the nation’s ability to handle the critically ill.
Transparency may be the key to the puzzle for investors as they try to grapple with questions regarding India’s ability to keep its economy and long term goals strong. After a dynamic bull run of the USD/INR and values of 77.0000 being hit in late April as coronavirus fears escalated, the trend has turned bearish. Yes, there have certainly been reversals and small bull runs, but selling of the US Dollar against the Indian Rupee has flourished.
Cynical traders with knowledge of the USD and US Federal Reserve may correctly point out that the selling of the USD/INR is an outgrowth of a core belief that the USD should be weaker, and not necessarily mean the Indian Rupee has found a swarm of new believers. However, the technical movements of the forex pair are not concerned with the ‘whys’ as much as they are with the ‘what’s next’ for the trend.
If global risk sentiment remains steady during the month of August there is reason to suspect the USD/INR may continue to build on its bearish trend. Again, the support level of 74.5000 is important and a sustained amount of selling needs to occur to build on this bearish trend and seek lower marks. Traders should certainly expect reversals higher on occasion. However, if the 74.5000 is broken lower and the value of the USD/INR remains under this mark and actually turns it into a resistance level during the month of August, tests of downward momentum could find additional speculative opportunities.
USD/INR Outlook for August:
Speculative price range for USD/INR is 73.7500 to 75.9000.
Support at 74.5000 is a vital inflection mark and if broken, the 74.0000 could become the target downwards if momentum builds.
Resistance at 75.5000 looks capable and 75.9000 now looks like a potential high water level.
