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USD INR : Weakness sets in…!

Our view has been in line with the USDINR pair weakness that has accelerated rather strongly. This is clearly suggesting some fresh panic been induced into the system. The strong domination of the pandemic across the globe has been a case for concern to central bankers all over the world. While measures are being undertaken in the scale of 2008 crisis we still need to achieve some clarity on how the events are going to shape our approach. The weakening of USDINR has clearly demonstrated the stress that could extend through the next few months ,until we find a cure. With the steadily deteriorating global scenario on the back of COVID-19 the accelerated selling by foreign institutional investors of Indian equities heightened market volatility.

The pressure was quite evident on the charts as we observe that the USDINR went into a lull phase in 2019 after its sharp weakening seen in 2018. The ominous breakout from the congestion zone as can be seen on the weekly Ichimoku charts suggest that the trends are picking up once again to the upside. The sharp move above is all-time high of 74.40 indicates that there is more pain in store. Looking at the chart we note that the last weeks breakout was above the median line around 73.50 that was holding the weakening for a while. The strong move beyond these zones suggest that we could be looking at 77.50 considering the overall reaction by the central banks across the globe. We are in a state of fear that is unprecedented and this could only fuel the prices higher. Only a weekly close below 73.50 could bring back some sanity in the INR else we are headed for a sharp weakening.

Considering how the markets are behaving now. we should be curbing our reactions to such scenarios. It would be ideal to consider our hedging stance in a piecemeal manner as the globally the effort still continues to show sustained weakness. While , effort shall be undertaken to contain the weakness and curtail the chaos that is surrounding us. Lower end seems to be capped around 72 as that would become the new base fort the coming months. With INR showing more chances of a weakening than strengthening one should continue a bullish dollar outlook and step up the hedging measures albeit a little moderately.

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