USD/INR Analysis and Path Ahead
Morning Update: Post-FOMC, Will the USD/INR pair continue to increase, or will it hit the 200 DMA again?
In recent days, the USD/INR has traded sideways inside the range, falling below our previously identified resistance level of 83.50. The USD/INR exchange rate has fluctuated between 83.00 and 83.50 over the last three weeks, dropping below 83.00 last week before rebounding. Yesterday, we also heard FOMC remarks, and the FED does not envision any rate cuts until inflation is more confidently approaching 2%. This was the fourth meeting in a row that the FED kept interest rates steady. Policymakers reiterated that they do not expect rate reduction until they are more sure that inflation is approaching 2%. Fed Chairman Powell also stated that inflation has decreased significantly but remains above the 2% target; reduced inflation is welcome but requires further evidence.
Using the USD/INR chart and the February monthly options data, we can forecast whether the trend will continue to decrease or grow.
- For the past few weeks, the USD/INR has traded sideways between 83.00 and 83.50.
- The chart indicates a solid support zone of 82.70-82.80, and USD/INR may see significant demand near the 200-day moving average, which is in the 82.70-82.80 range.
- The USD/INR monthly option chain for February also shows heavy put writing near the 83.00 strike, indicating that the pair will rise quickly to 83.50.
Please carefully review the preceding chart to better understand the USD/INR price movement. For weeks, the USD/INR exchange rate has been between 83.00 and 83.50. Last week, the price plummeted and closed below the 83 zone. The USD/INR broke below 83.00 last week and fell below it after October, indicating that the pair is nearing the conclusion of its long-term dispersion. However, the 200 DMA, which is near 82.70, demonstrated strong demand, and buyers pushed the price beyond the 82.70-82.80 range, as suggested by the USD/INR February monthly option chain.
Let's have a look at and grasp the USD/INR February monthly options chain.
The option chain in the table above shows considerable put writing at 83 strikes, and despite the fact that the price fell below the 83.00 level in the spot market the previous time, the writers have not given up, indicating that purchasers drove the price over the 83.00 line. The option chain suggests that the USD/INR could restart its strong upward trend and return to the 83.50 spot zone.
The Dollar-Rupee pair (USD/INR) has been consolidating for several months in the 83.00 to 83.50 area, as shown in the chart and option chain above. It appears that consolidation will continue. Despite the high fluctuation in the dollar index, the Reserve Bank of India's (RBI) policies have kept the USD/INR exchange rate relatively constant.
The USD/INR is expected to stabilize further, possibly between 82.70 and 83.50. This anticipates an 80-paisa range within which the USD/INR may meander in the coming weeks before establishing a new range. Currently, the decline appears to be good for purchasing USD/INR because the 82.70-82.80 area acts as a strong support zone. Traders might seek for buying opportunities on the USD/INR pair. Traders use the risk-reward ratio to manage their capital and potential losses. The ratio is useful for calculating a trade's risk and expected return. In general, greater risk equals higher expected returns. Anything more than 1:2 represents an optimal risk-reward ratio.
Consider the levels of support and resistance on the daily USD/INR chart. Each level is shown on the spot chart.
|
USD/INR |
Support |
Resistance |
|
Level 1 |
82.70 |
83.40 |
|
Level 2 |
82.50 |
83.50 |