Over the last few weeks the INR had consolidated at 69 and finally the support was given away largely due to global cues that emanated from easing crude oil prices and weaker greenback. Post Budget implications could help further strengthen the resolve in INR to strengthen further. There was also some help offered by the other emerging market economies that displayed some recovery thus adding to the bullish sentiment on the INR. Our view that the 69 level shall be tested has been in line with the market movement. Now we need to await some clarity as the agenda of the reinstated BJP government shall be set forth that shall enhance the traders and investors perspectives about how the INR shall get influenced.
RBI introduced a rate cut for the third time in a row due to the slow economic growth and rising global uncertainty. Now with the Budget being released we need to see how the combined effect shall help to attract the Foreign flows into our economy. Last few months the forex reserves are seeing a sharp increase and reaching a record high at $426 billion. Foreign exchange reserves are held by the RBI as a tool to maintain stability of the currency and control inflation.
Moving to the charts we observe that the weakness could not continue and post the election the INR began to drift lower. Now , the prices too are reflecting a strengthening scenario as the durable support around 69 has been breached on the back of weaker dollar seen in the last few weeks. The higher timeframe charts indicate that the are indicating possibility of further decline towards 67.50 as the large body negative candle has triggered some selling pressure. Taking a look at the
ADX DMI setup we are observing that the congestion zone on weekly charts is clearly given way to more declines and could head lower if more positive cues begin to emerge. Hence for the coming few weeks one should be looking at the rupee to strengthen as the dollar will continue to be under pressure . For the coming week we could expect the INR to be in the range between 69.50 and 67.50. We could also looking at hedging against a stronger rupee as trends are showing signs of more strengthening.