The outlook is still bullish.

Bullish View

• Buy the USD/INR and set a take-profit at 79.63.
• Add a stop-loss at 78.58.
• Timeline: 1-2 days.

Bearish View

• Set the sell-stop at 78.74 and a take-profit at 78.0.
• Add a stop-loss at 79.50.

The USD/INR pulled back sharply on Thursday morning as the spectacular rally faded. The pair dropped to a low of 78.53, which was lower than this week’s high of 79.32. It is still remarkably higher than where it started the year at.

US Jobs Data Ahead

The Indian rupee has been in a strong sell-off against the US dollar as investors have embraced a more risk-off sentiment. They have favored moving to the relatively safer US dollar as risks of a recession rise amid the extremely hawkish Federal Reserve.

On Wednesday, minutes by the Federal Reserve showed that the bank was committed to continuing hiking interest rates in the coming months. Only one member of the committee – Esther George – opposed the giant 0.75% rate hike that happened in June.

The minutes also revealed that members were optimistic that they will implement another 0.75% or 0.50% rate hike in the coming meeting. All these actions, together with the performance of commodities, have increased the possibility of a recession. As a result, investors have moved to the safety of the US dollar.

The next key catalyst for the USD/INR price will be the upcoming US non-farm payroll (NFP) data that will come out on Friday. Analysts expect the data will show that the economy created more than 200k jobs in June while the unemployment rate remained at about 3.5%.

The pair will likely react mildly to estimates by ADP that will be published on Thursday. Historically, ADP numbers tend to have a significant divergence from the official ones. The US will also publish the latest export and trade numbers.

There is no scheduled economic data from India on Thursday and Friday and the next meeting by the RBI will be in August. Therefore, the USD/INR price will mostly be influenced by the US dollar.

USD/INR Forecast

The four-hour chart shows that the USD/INR pair has been in a strong bullish trend in the past few months as the rupee crashes. The pair is trading at 79, which is slightly below this week’s high of 79.33. In most periods, financial assets tend to consolidate or have a pullback as they near a key resistance level.

The pair is still above the 50-period moving average while the MACD has moved made a bearish divergence pattern. Therefore, the outlook is still bullish, with the next key price target being the second resistance of the standard pivot point at 79.64.

The pair will likely keep rising in the near time.

Bullish View

• Buy the USD/INR and set a take-profit at 81.
• Add a stop-loss at 78.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 79 and a take-profit at 78.
• Add a stop-loss at 81.

The USD/INR pair continued its bullish trend and is hovering near its all-time high. It is trading at 79.20, which is about 7.5% above the lowest level this year. The Indian rupee has crashed by over 25% from its lowest point in 2018.

Indian Rupee Crash Continues

The USD/INR pair has been in a strong bullish trend in the past few months as the dollar strength continues. The dollar has gained against most developed and emerging market currencies. For example, the euro crashed to a 20-year low against the US dollar. Similarly, the Japanese yen has fallen to a 24-year low.

The Indian rupee has crashed even as the economy has done better than other countries. Data published in June showed that the country’s economy expanded to over $3 trillion and is about to become the fifth-biggest economy in the world.

Data published on Monday showed that India’s exports rose to over $37.94 billion in May while imports rose to $63.5 billion. As a result, its trade deficit widened to over $25 billion. Still, exports have jumped on an annual basis.

Additional data showed that India’s services PMI rose from 58.9 to 59.2, which was better than the median estimate of 58.7. The manufacturing sector has also continued doing well in the past few months. This performance is partly because India has benefited from the crisis in Ukraine since it is getting cheaper oil and gas from Russia.

The USD/INR is rising as the actions of the Federal Reserve and the Reserve Bank of India (RBI) converge. The Fed has hiked interest rates three times this year and analysts expect that it will hike in all the remaining meetings. The RBI has also turned hawkish and is expected to hike rates several times this year.

USD/INR Forecast

The four-hour chart shows that the USD/INR pair rose to a high of 79.35. This price is significantly above the important support at 78.28, which was the highest point on June 13th. The pair has moved above the 25-day and 50-day moving averages. The Relative Strength Index (RSI) and the MACD have continued rising.

Therefore, the pair will likely keep rising in the near time. The next key resistance level to watch will be the psychological level at 81.

Buying on the dips will more likely than not be the best way forward.

The US dollar rallied ever so slightly during thin trading on Monday, as it was Independence Day in the United States. The more exotic currency pairs like the US dollar/Indian rupee would of course be very quiet. That being said, the candlestick for the day looked just like the ones before it, like perhaps the Bank of India is fighting the depreciation of its own currency. That’s probably true to a point, although the DOI has a long history of eventually letting the market go its own way, and seemingly find itself more concerned with the rate of change than anything else.

You can see that until a couple of days ago, the US dollar was shooting straight up against the rupee, reaching the ₹79 level. It appears this is an area that the BOI may defend, but eventually they will let the market go higher. The candlesticks over the last couple of days suggest that we could see a bit of a pullback, but quite frankly, in a massive uptrend like this it makes sense that we would see that happen. After all, some people are going to need to take profit after a huge move higher, and yet others will be cautious about paying for this pair all the way up in this area.

The 50-day EMA sits just below the 78 level, and is rising quite steadily. Because of this, I do think that the downside is going to be somewhat limited, unless the Federal Reserve does something to shock the markets. As things stand right now, the Federal Reserve is by far the most hawkish major central bank in the world. In fact, it could cause the US dollar to be a bit of a wrecking ball against almost everything else, especially emerging market currencies such as this one.

Another thing to consider is that if we do end up entering a global recession, economies like India will bear the brunt of this, as we continue to see a lack of international trade. Beyond that, some countries such as India will have to worry about wheat over the next several months, not exactly a positive sign for the economy going forward. That being said, it should be noted that the Russians have allowed grain to be exported from Ukraine recently. Buying on the dips will more likely than not be the best way forward.

Pullbacks continue to offer value.

The US dollar had a slightly positive session on Wednesday against the Indian rupee, as well as most other emerging market currencies. By rallying the way that we have, it looks as if the market is trying to build up the necessary momentum to break above the ₹77.50 level, perhaps kicking off yet another move higher. When you look at this chart, you can see that there has been a lot of bullish pressure recently, but it does make a certain amount of sense that we need to build up momentum to continue the bigger move.

Currently, I see the ₹77 level as an area of support, and I would be a bit surprised if we broke down below there. That being said, if we were to break down below there it does not necessarily mean that I would be a seller, because this is a market that has a lot of support all the way down to the ₹76 level, where we launched from just five sessions ago. It is probably worth noting that the 50-day EMA is just above there as well.

The central Bank of India will not fight the idea of the rupee depreciating, as long as it is orderly. As long as that is going to be the case, it is very likely that this remains a “buy on the dips” type of market, which could be said about most emerging market currencies. The US dollar continues to strengthen across the board, so I have no interest in shorting this market. However, if we were to break below the ₹76 level, I could start to question the overall trend. At that point, we would more than likely go looking to reach the 200-day EMA.

The only way I see this happening for anything approaching a longer-term trade to the downside is if the Federal Reserve suddenly changes its mind. That does not seem to be likely at this point, especially as the CPI numbers in the United States came out hotter than anticipated on Wednesday. With that, I think it is only a matter of time before we continue to see the greenback climb against the rupee, as the ₹70 level will be targeted sooner or later. Pullbacks continue to offer value.

I think that the market is going to try to go to the ₹77 level, which is where we had seen a significant pullback previously. 

On Monday, the US dollar initially pulled back a bit against the Indian rupee, but as we have seen time and time again, the US dollar recovered to show signs of life. The US dollar will continue to attract attention as long as we are concerned about global growth and risk appetite. After all, the Indian rupee is pretty far out there on the risk appetite spectrum, while the US dollar is considered to be as close to being risk-free as possible.

Further driving money into the US dollar is the fact that the interest rates in America continue to rise as the bond market selloff. This suggests that we are going to continue to see a lot of money flow into the United States as yields are much more attractive. That being said, we should also pay close attention to the fact that as risk appetite drops, it is a bit of a feedback loop going forward.

Looking at the technical analysis, you can see that the ₹70 level underneath has been interesting for both buyers and sellers. Furthermore, the 50-day EMA is sitting right there as well, so it does suggest that the ₹70 level might end up being a bit of a “floor the market” currently. The short-term pullback should continue to offer buying opportunities, especially as value hunters entered the fray. Ultimately, I think that the market is going to try to go to the ₹77 level, which is where we had seen a significant pullback previously. As you can see on the chart, I have a large figure market, and as you look at the chart you can see just how technical this pair tends to be. What this suggests to me is that if we were to get a daily close above the ₹77 level, we could go looking to reach the ₹78 level. I do not believe that the Bank of India is concerned about a depreciating rupee at the moment, as inflation is a big problem worldwide. Furthermore, the move has been relatively orderly, and that is important to central banks as well. It is the rate of change that gets people concerned and right now the rate of change is not out of control. As long as this is the case, I think you jump in and buy these dips as they occur.

The US dollar initially tried to rally against Indian rupee on Good Friday but struggled a bit as we pulled back from the ₹76.50 level. The resulting shooting star suggests that we are running out of momentum and could turn right back around to reach the ₹76 level. The size of the candlestick is rather interesting, and it is in an area where we have seen a lot of trouble previously. Ultimately, the US dollar will continue to see a little bit of hesitation, and the USD/INR pair tends to be rather choppy.

If we were to break above the top of the shooting star, then the market could very well go looking to the recent highs at the ₹77 level. That obviously would be a very pro-US dollar, perhaps in a major “risk-off move.” Looking at this chart, we certainly made a significant attempt to break out, but could not quite do so. Because of this, the market continues to see a lot of choppy volatility and considering that the Indian rupee is generally very messy, that is not a huge surprise.

The 50-day EMA is currently at the ₹75.75 level and rising. The market is going to pay attention to that indicator as a potential support level. The market also has the ₹75.50 level underneath there offering support as well. Keep in mind that India is considered to be an emerging market currency, so it needs risk appetite to strengthen. If we continue to see a lot of concern around the world, it does make sense that we would see the US dollar pick up a bit of attention.

As the US dollar is considered to be a safe currency, and India is an area of explosive growth, it will come down to risk appetite globally that will have the biggest influence on this market. As Friday was Good Friday, liquidity may have been a bit of an issue as well, so I think it is probably a bit much to think that this market has stated something during the day. Ultimately, this is a market that continues to see a lot of chop, but that is going to be the case with most Forex markets. At this point, it looks like we could pull back a bit.

The US dollar has fallen a bit against the Indian rupee during trading on Thursday but has found a bit of buying just below the ₹76 level. By doing so, the market ended up forming a bit of a hammer which looks quite a bit like a perfect “pull back and retest” of the overall trend. Because of this, if we can break above the top of the candlestick for the Thursday session, it is very likely that the pair will go looking towards the ₹76.50 level.

Market participants continue to see the US dollar as a greater value, as we have been in an uptrend. Furthermore, you have to worry about some emerging markets as a global slowdown is certainly going to be felt places. The Indian government is not only is the most business friendly, and therefore the US dollar does tend to “buck the trend” against emerging markets in this currency pair at times.

Underneath current trading, the ₹75.50 level might be an area of interest, as it has not only been structurally important previously, but it also has the 50 Day EMA moving into the same area. Because of this, I would anticipate that a certain amount of technical buying may occur if we get to that area. I do believe that it is probably only a matter of time before we continue the uptrend, but if we were to break down below the ₹75 level, then we might have bigger issues at hand.

It is difficult to imagine a scenario where the US dollar sells off for an extended amount of time, simply because the world’s economy seems to be slowing down and of course we have issues when it comes to a whole host of things, not the least of which would be a war in Ukraine. The US dollar is a safety currency, and while the cross between the greenback and the rupee is not necessarily one of the heavily traded currency pairs, US dollar strength or weakness across-the-board typically will have at least some effect on what happens here. Because of this, I think that we are setting up for a continuation of the rally and perhaps a move to the ₹77 level over the longer term. It might take a while to get there, but it certainly looks as if that is what we are setting up to do.