- The US dollar has fallen rather hard during trading session here on Monday to reach down to the 83.39 Rupee region.
- This happens to be an area where the 50-day EMA resides, so therefore I do think we're getting fairly close to an area that could be well supported.
That being said, keep in mind this is a market that is very range bound and that's mainly due to the fact that the Bank of India is highly active in manipulating the value of the Indian rupee. Above, we have a massive barrier in the form of 83.7 rupees offering significant resistance. If we were to break above that, it would allow the US dollar to truly take off. And I think at that point in time, you have to assume that most emerging market currencies will struggle.
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On the other hand, if we were to break down below the 82.6 rupee level, then that would be a significant breakdown in the US dollar. Before any of that happens, we have a lot to chew through, and this pair does tend to be very sideways, so I assume that we will continue to do more of the same. Even if we break down below the 50-day EMA, I think the 200-day EMA will be of significant interest, which stood just above the psychologically important 83 rupee level which recently offered support. In other words, I don't think you're getting clarity anytime soon, and I think the best thing you can do if you choose to trade this pair is to simply trade it back and forth. Range bound traders will love trading this on short term cards, simply using something along the lines of a stochastic oscillator for backing up trade signals. At this point, I'm very neutral on this pair.
Going Forward
I think that is is going to be very difficult going forward to gauge overall risk appetite, and therefore pairs like this could be battlegrounds. While I don’t expect big moves, I do expect a lot of volatility in this pair, as well as a lot of other emerging market pairs.
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