5% annual growth. That is a number that would send US squealing like a teenage schoolgirl. Euro-Zone would kill to have any growth at all. For China, that would be a disaster and it is the same case for India. The Indian Government expects its economy to growth at 5% in 2013, much worse than IMF’s estimate of 5.9%, which was already revised lower once from 6.0%. As a country with more than 17% of the world’s population, growth rate needs to be higher in order to feed the rest of its country properly. Economist put the figure at around 8-9% per year, which India fell short since 2011.
USD/INR rallied slightly to push price above 53.2, close to the support/resistance level around 53.25. It seems that market isn’t fully convinced that RBI will ease more despite the bleak outlook, and they have good reasons to think so. Inflation rate remains at all time high despite growth slowdown in 2012. RBI has only recently intervened with a 25 bps rate cut, citing slowing rate of increase of inflation giving them window of opportunity to ease. However, with the recent easing, there is a risk that gain in inflation will pick up once more. Should inflation go way out of hand, RBI might be forced to do the unthinkable and inflate the Rupee in order to fight against inflation.
Weekly Chart shows USD/INR still on the way lower, with a Triple Top pattern potentially forming. Price has also broke away from the rising trendline, breaking the bullish momentum that we’ve seen since August 2012. 51.70 may provide some support against a move back towards 48.75, which will be the neckline for the Head and Shoulders Pattern that will be formed should price behave as described above. The interim support around 51.7 theory is supported with Stochastic reading suggesting a short-term bottom may be in place soon as readings is entering the Oversold region now.
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