USDINR-Weekly Outlook-Venkat's Blog

Dec 16, 2023

The currency pair is witnessing surprise action as it moved from the high of 84.41 to 82.93. The market is refusing to believe this move as it has wedded to the logic that the currency pair will not be allowed to trade below 83.00 levels. They had seen that the currency stable irrespective any big move in DXY, Yields or Stock market. As observed in the previous blog:

A few observations

• Lower crude prices keep the demand for USD. After having seen the big move of 74 in Jan 22 to 83 in Oct 22, The Importers seem to Hedge themselves fully and the exporters may be waiting and might be repenting for having missed higher levels
  
• The rates remaining in a small range is not anything new for the currency pair as we could see from the quarterly charts, it has been in small ranges for almost 3-4 quarters in the past once in every three years. However, this general behavior altered after 2008
  
• Ultra-low Vols may be a huge risk and there could be sharp move happening when no one expects
  
• In the earlier occasions the move towards 82.90 reversed quickly. It remains to be seen how far this would go. There is always a slip between the cup and the lip. Expect the range of 82.70-83.15 would continue to hold for the week with a crucial support at 82. 70 and there could be choppy moves within this range. A close outside this range requires re-assessment of risk/direction and target.
  

A few more observations:
As noted in the previous blog, continue to keep the following input for quick reference though it is repeated for the past 8 months.

• The 82.75-83.25(with error adjustments) zone is the Fib projection of July 2011 to July 2013. Alternatively, the Fib projection of the move from Jan 22(Low) to Oct 22(High) and Nov 22 low also suggest the projection as 82.92. Hence, the importance. If breached, we may see another spike towards 85.70
  
• As noted in our 3rd July Blog:
  
• A deeper correction is long overdue. Market is expecting 82.70-83.10 will be protected. If appears that the same kind of yo-yo moves may continue till one more quarter if we do not see a close below 82.70.
  
• The result is that it has extended to second quarter as well and seeing some movement towards the close of the quarter/year
  
• We have been witnessing depreciation for the past 12 years starting 2011 with exception of 2017 
  

Disclaimer: The views expressed here are personal and not connected to SYFX Treasury Foundation. The views are for learning and reference purpose only.