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Narrowed trade discrepancy, all time high forex reserves can enhance rupee

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After a long chapter of Consolidation, the USD INR, as predicted, sustained the up move in the previous week too. Although the bulls opted for profit booking at higher levels and on weekly basis the currency pair congested off the week high but still gain 86 paise. The dollar has cherished more than 3.3 percent the last three weeks but the currency pair is likely to straighten out down at current levels and minor dip is also not ruled out. The huge rally of the last three weeks is now showing signs of abating, as prices formed “Island reversal” candle stick prototype on the daily Chart basis. Long positions should be avoided as there is a breach on a daily basis as well as weekly chart and currency pair is trading far away its 20 day moving average(DMA)

Generally, any unexpected change in price is established down near its 20DMA and in this case, it is placed at 70.10. The Seven bar negative discrepancy on RSI is confirming the negative candle stick pattern and suggesting that bulls are tired. The weekly chart is recommending that the currency pair could retreat towards the support level of 70.1. Though the Long term view is still bullish and any fall will only be the retracement after the Breakout as the US currency is trading above all major moving averages and the much talked about falling trend line is also wrecked on an upside.

The recent massacre, the Indian rupee came out as most depreciated currency in Asia in August. The Fundamental Triggers, however recommended that this fall could be in detention in coming days on the back of positive news flows that is the trade deficit narrowed to $13.43 million in July, principally due to sharp fall in gold and crude oil imports while exports have increased by 2.25%.  As a result, the trade deficit is at a four month low. The Selling pressure from foreign institutional investors has been concentrated and even on August 14 they were net buyers after a long selling session that  force be due to short casing.

The forex reserves hit a new high of $430.57 billion in the week ended on August 9. The Forex reserve will help the Reserve Bank of India to arbitrate in the situation by selling dollar and grant strength to the rupee. The Overall situation recommends that current move in USD INR could go throughout a phase of mild correction .

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