USD/INR Analysis and Path Ahead
Morning Update: Will the USD/INR pair continue to rise, or will it hit the 200 day moving average ?
The RBI's monetary policy committee opted to retain the repo rate at 6.5% in last meeting. In addition, the policy committee forecasts 4.5% CPI inflation and 7% GDP growth in FY25. RBI Governor Shaktikant Das also highlighted that the war on inflation is far from done; the fight to manage inflation over time would continue, meaning that rate cuts will not be enacted soon. Last week higher-than-expected CPI data boosted demand for the dollar, and the DXY jumped to 105.00 zone.
In recent days, the USD/INR has moved sideways within its range, dipping below our previously indicated resistance level of 83.50. The USD/INR exchange rate has swung between 83.00 and 83.50 during the last three weeks, falling below 83.00 last month before recovering. Using the USD/INR chart and the February monthly options data, we can predict whether the trend will continue to fall or rise:
- For the last three weeks, the USD/INR has traded sideways between 83.00 and 83.50.
- The chart shows a strong support zone of 82.70-82.80, and USD/INR may see major demand near the 200 moving average, which is also around 82.70-82.80.
- The USD/INR monthly option chain for February indicates heavy put writing near the 83.00 strike, implying that the pair will soon move beyond 83.50.
Please carefully analyze 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 month, the price dropped and closed below the 83 level. The USD/INR dipped below 83.00 last month, signaling that the pair is nearing the end of its long-term instability. However, the 200 EMA, which is close to 82.70, witnessed significant demand, and buyers drove the price over the 82.70-82.80 range predicted by the USD/INR February monthly option chain.
Let's take a look at and study the USD/INR February monthly option chain.
The option chain in the table above indicates a lot of put writing at the 83 strike, and even if the price has fallen below the 83.00 level in the spot market, the writers haven't given up, indicating that purchasers have pushed the price over the 83.00 level. The option chain suggests that the USD/INR may resume its strong rising trend and return to the 83.50 spot level.
The Dollar-Rupee pair (USD/INR) has been consolidating for several months in the 83.00 to 83.50 range, as indicated in the chart and option chain above. It appears that the consolidation will continue. Despite the dollar index's considerable volatility, RBI policies have kept the USD/INR exchange rate reasonably stable.
The USD/INR pair is projected to consolidate further, potentially reaching 82.80-83.50. This expects a 70-paisa range in which the USD/INR will trade in the following weeks before settling into a new range. Currently, the dip appears to be positive for purchasing USD/INR because the 82.70-82.80 range provides significant support. Traders may seek buying opportunities in the USD/INR pair. Traders employ the risk-reward ratio to balance their profits and prospective losses. The ratio is important for determining a trade's risk and projected return. In general, increased risk leads to larger predicted rewards. Anything higher than 1:2 is considered an excellent risk-reward ratio.
Examine the levels of support and resistance on the daily USD/INR chart. Each level is displayed on the spot chart.
|
USD/INR |
Support |
Resistance |
|
Level 1 |
82.70 |
83.40 |
|
Level 2 |
82.50 |
83.50 |