After beginning the first couple of weeks of June with a rather tranquil and consolidated range near highs of 77.8000, suddenly on the 10th of June buying power generated within the USD/INR and the 78.0000 realm began to be challenged. Technical traders may not want to hear about the following, but the buying of the USD/INR was likely sparked by the higher than anticipated interest rate hike from the U.S Federal Reserve which was ‘leaked’ to the financial world around the 9th and 10th, and then made official on the 15th of June.
On the anticipated move of a 0.75% hike, instead of the previously forecasted half a basis point of 0.50%, financial institutions clearly began to align their USD/INR holdings accordingly. Skeptics of this fundamental analysis may say that on the 14th and 15th of June the USD/INR actually sunk slightly in value. However, experienced speculators likely have heard of the adage, ‘buy the rumor and sell the fact’. When the higher than expected interest rate was made official most of the financial houses were already positioned, which left speculators to trade short term chaos for a couple of days.
However the USD/INR didn’t rest idly too long and merely sit on its higher perch, because after falling to a ‘low’ of about 77.8200 on the 22nd of June, the USD/INR started to incrementally rise again. And just a couple of days ago on the 27th of June it appears financial institutions may have started buying the USD/INR again, because price velocity increased and the Forex pair suddenly slammed higher and started breaking record values and brushing away key psychological resistance.
As of this writing the USD/INR is trading near the 78.9000 vicinity with slight choppy conditions persisting. However, the USD/INR is certainly holding onto its higher price values even as the heights for the Forex pair do appear relatively high. With record highs being set it is hard to determine a technical barrier, except to say numbers like 79.0000 and 80.0000 obviously may appear as targets for some speculative players willing to pursue buying positions even at these rather lofty values. Behavioral sentiment will certainly factor into the early July trading for the USD/INR, and rumblings about correlations will be whispered by those who try to explain why the pair is traversing these prices.
There is a suspicion the U.S Federal Reserve may raise interest rates again, sooner rather than later. Another hike of 0.75% has been voiced as an option by the U.S central bank, but recent economic data from the States are beginning to show signs of the economy slowing down. The perception that the U.S economy is starting to curtail inflationary demand may stop the Fed from raising another 0.75% and allow them to ‘only’ raise 0.50% this time around. However it is a dangerous game to speculate on the U.S economy at the moment and how the American government will respond.
USD/INR Outlook for July 2022
Speculative price range for USD/INR is 77.3900 to 80.2500
The USD/INR is near record heights and while some speculators may be tempted to look for reversals lower, they should be extraordinarily careful. If the USD/INR were to fall below the 78.4000 mark and sustain value below, this may be a temporary indication further selling could develop. Traders should not be overly ambitious regarding targeting downside momentum and they should use take profit orders to cash out winning positions if they develop. Until the U.S Fed acknowledges publically they plan on being less aggressive regarding interest rates, support may remain durable about the 77.4000 vicinity.
Speculators with a taste for adventure may believe the psychological mark of 79.0000 is now a legitimate target. This value may seem ridiculously high to some traders, but the Forex market seldom cares about speculative opinions. If the 79.0000 level is punctured higher it seems reasonable additional bedlam in the USD/INR could cause volatile price action, and some targeted trading may actually aim for the 80.0000 mark. Traders need to be careful at the current heights of the USD/INR. There may be more room to climb, but timing the market is extremely difficult.