USD/INR extends downside after Head and Shoulder breakdown.
USD/INR Consolidates Around Immediate Support
The USD/INR pair is currently undergoing a consolidation phase as it defends its immediate support level of 82.50. The USD Index, which measures the value of the US dollar against a basket of major currencies, is exhibiting subdued performance, contributing to the stability of USD/INR. Let’s take a closer look at the factors influencing this consolidation and what to expect in the near future.
USD Index and Interest Rate Hike Expectations:
Investors are eagerly anticipating a continuation of the interest rate hike regime from the Federal Reserve. The potential for higher interest rates tends to attract investors seeking stronger returns, which could boost the USD Index. However, recent concerns over the long-term impact of the US debt-ceiling proposal have led to a pullback in the USD Index, as higher debt levels could affect the credibility of the US economy.
Indian Rupee Dynamics and RBI Interest Rate Decision:
In the Indian context, market focus has shifted towards the upcoming interest rate decision by the Reserve Bank of India (RBI). The decision, expected to be announced next week, will have implications for the Indian Rupee and its attractiveness to foreign investors. Investors are closely monitoring any signals from the RBI regarding monetary policy and interest rate adjustments.
Technical Analysis:
Breakdown of Head and Shoulder Chart Pattern: From a technical perspective, the USD/INR pair recently experienced a breakdown of a Head and Shoulder chart pattern on an hourly scale. This pattern indicates a consolidation phase where inventory shifts from institutional investors to retail participants. It is worth noting that the 50-period Exponential Moving Average (EMA) at 82.65 is currently acting as a barrier for US Dollar bulls.
Bearish Momentum Indicators:
The Relative Strength Index (RSI) (14), a widely used momentum indicator, has entered the bearish range of 20.00-40.00 for USD/INR. This suggests the presence of bearish momentum in the pair, adding to the cautious sentiment.
Outlook and Price Levels:
Looking ahead, if the USD/INR pair breaks below the immediate support level of 82.50, we can expect further downside movement toward September 29, 2022, high at 82.22. A breach of this level could drive the pair toward the round-level support at 82.00.
On the other hand, a decisive break above the May 23 high at 82.97 would indicate upward momentum in USD/INR. This could potentially lead to a test of November 3, 2022, high at 83.18, followed by the all-time high at 83.42.
USD/INR Daily Chart:
Conclusion:
The USD/INR pair is currently consolidating around its immediate support level of 82.50, while the USD Index remains subdued. Market participants are closely monitoring the interest rate hike expectations from the Federal Reserve and the upcoming RBI decision. Technical indicators, including the breakdown of a Head and Shoulder chart pattern and bearish momentum in the RSI, suggest a cautious approach for USD/INR traders. It is important to keep an eye on key support and resistance levels to gauge the pair’s future direction.
