USD/INR tagged the 62.4 level yesterday as expected, but the subsequent bearish push was much weaker than expected. the soft support of 62.2 held firm, with prices subsequently rebounding higher and breaking the Channel Top resistance (see Weekly Chart below), suggesting that a bullish breakout is in play currently.
On hindsight, there are signs of a strong bullish push in the making – the initial bearish reaction after the rising trendline has been tagged was mostly muted which averted a bearish cycle signal from the Stochastic indicator. The bearish cycle signal did appear subsequently, but currently momentum has swung in favor of the bulls, with Stoch readings making a sharp turn pointing higher. The fact that Stoch curve has pushed above the 60.0 level (where previous Stoch peaks were seen) is a good sign that conviction is strong. This increases the likelihood of a sustained bullish push above the rising trendline in the S/T and, with 62.6 an estimated bullish target based on the space afforded before Stoch curve enters Overbought regions.
From a long-term perspective, the prospect of a Channel Top break is a welcomed return to the long-term trend. Stochastic indicator is also in favor of a bullish cycle move with stoch curve finally distancing itself away from the Signal line and affirming the Stoch trough that was formed 2 weeks ago. Furthermore, fundamentals continue to favor a bullish USD/INR. For all the misgivings about the political kerfuffle surrounding the debt ceiling issue and the potential bearish impact of QE tapering, US economy is undoubtedly in a much healthier state than India. At the very least it is moving in the direction of recovery. A potential QE tapering scenario will further strengthen USD as well, favoring a bullish push in USD/INR.
Therefore, with short-term technicals pointing higher and getting in line with bullish long-term technicals coupling with bullish fundamentals, a potential push all the way towards 70.0 is in the cards. Watch out for acceleration towards the upside when the breakout is confirmed on both the short and long term charts.