Today we shall be analyzing two forex pairs. The first one being analyzed is the USD/INR pair in which the Rupee has been getting beaten black and blue for the prior few weeks which has resulted in it clocking the Rs 69 mark. Additionally, we shall be also analyzing the GBP/INR pair where the Indian rupee has off late being doing well as it has managed to strengthen against the British pound.
The US Dollar has been strengthening against the Indian rupee on a constant basis from the beginning of 2018 as it stood at 63.3 in January after which an ascent occurred resulting in it attaining the 69.1 mark in June. This resulted in the Indian government facing an onslaught on social media platforms and news media. However, from June the pair has been trading in a box range pattern with minor upswings and downswings that have ranged between the Rs 68.2 mark to the Rs 69.1 mark.
However, I now believe the US Dollar shall be strengthening further due to various factors. I say this as the underlying fundamentals support my decision. The US statistics released last week showed that the American economy is in a good condition whilst the same cannot be said for the Indian economy as its statistics were a mixed bag of results with some being average and some being horrid in nature.
On the technical analysis front, the US Dollar is on a solid footing as it has just had a Doji candle which was followed by a large bullish candle. This reaffirms the market that the greenback bulls are back to the scene with a bang. Moreover, the RSI of the pair is currently in a sweet spot as it has started a sharp ascent on my setting that is clearly indicative that good days are ahead for the US Dollar. Lastly, we see that both the ADX settings have perched at a spot and the trend has turned from negative to positive thus reaffirming us that it is the time for the Dollar bulls to rally.
On the GBP/INR front the story has been different as the British have been dealing with hard times in their nation for the prior few months with their jobless claims tripling and their growth levels falling flat on the face. This has all resulted in the pound facing some pummelling which caused it to tumble from a high of Rs 95 in April to a low of RS 88 this month.
However, I see a temporary breath of bullish air getting infused into the British pound and that is all thanks to them receiving a good set of statistics last week and that too after a long-time period. I say that as the average house price in the United Kingdom rose to a new high of £230,380. Moreover, UK house prices for three months prior to July rose by 3.3% in comparison to the same period a year ago. However, I expect this bullish rise to be short-lived as the UK is facing a future situation of a no deal brexit which shall force the British market to brace itself for a few rate hikes over the next two years coupled with some economic disruption.
On the technical footing, the Pound managed to find its footing yesterday as it hit a key support level at Rs 88.268. This caused a turn around to occur as this level of support is a long-term candle support line plus a change of polarity zone. Moreover, we see that there has been a tweezer base pattern that formed with a bullish Harami. Furthermore, the ADX is showing that the bullish trend strength is currently robust.
The big picture:
For the exact levels to which I expect both the pairs to rise till do check the video below as they have been highlighted there.
Good luck trading.
Sandeep Singh Ahluwalia
MCSI (UK), MSc Fin (UK), MCom (India), BSc Econ (UK)
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