Has the new Governor Guv Raghuram Rajan done it? Rupee has been steadily increasing without any significant pullback since he took over on 4th September. The latest proof that USD/INR is in a bear trend can be found via the recent bullish push just a few hours ago – when Obama announced that he is seeking diplomacy rather than military intervention to coerce Syrian leader Assad into submission. This resulted in a sudden strengthening in USD, the end product of risk flows pushing USD/JPY higher and Gold lower.
However, that is not enough to inspire new bullish impetus, with price failing to push beyond 64.50 – the swing high of yesterday. Prices did manage to trade above the descending Channel Top but that only lasted for a moment before bears took over and send price below once again. This suggest that bearish momentum is still strong, and opens up the possibility of price heading back towards Channel bottom from here. Stochastic readings agrees with Stoch curve showing a top where recent peaks have been seen. Furthermore, there is a divergence spotted where current peak is higher than the preceding one despite price failing to reach previous highs. This suggest that this morning’s rally towards Channel Top is too fast too furious, and hence increasing the likelihood of a bearish pullback, adding weight to the push to Channel Bottom.
Fundamentally, nothing much has changed in India, and hence it seems as though market is simply pushing Rupee higher by giving Rajan advance credit. If Rajan doesn’t deliver, we could see stronger revenge bearishness coming out which will send USD/INR potentially to 70.0 and beyond. Right now, with no evidence that current momentum is fading, Rupee bulls can expect to enjoy the ride for a little while more.
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