In the last week of trading gradual upside momentum has developed in the USD/INR again. The currency pair is frowned upon as a speculative asset for the Indian public, but the USD/INR can be speculated on brokers’ platforms outside of the nation. The ability of the USD/INR via its rather incremental crawl upwards over the long term makes it an intriguing speculative opportunity for those who can gain access to its trading. The USD/INR while correlating to the broad Forex market offers its own price action dynamics driven by Indian government economic policy too.
The movement seen in the USD/INR over the past handful of days has reignited the notion that the currency pair is again establishing its long-term trend of higher price action. However, before speculators try to jump into the currency pair they must understand that the volume in the USD/INR can be extremely light and then propelled by sudden moves generated from large financial institution forces that can be detrimental for retail traders.
The Indian government via the Reserve Bank of India has a clearly stated policy that small speculators should not pursue the Indian Rupee because of inherent dangers due to its volatility which includes not only price velocity, but reversals. Meaning that the current price action in the USD/INR, although it has trended upwards since the 7th of July, is liable to see rather elaborate intraday movements which small day traders can find challenging. While price action in the USD/INR is alluring it can also prove dangerous.
USD/INR Rebounds From June Lows, but May Highs Loom
The current value of the USD/INR is near the 96.600 mark depending on the prices being displayed via bids and asks. The USD/INR is trading higher once again, but intriguingly the apex values of the currency pair were displayed in the third week of May when the 97.200 vicinity was traversed. Lower price action in the USD/INR had been seen from the highs of May and into the third week of June, this when the USD/INR had found a depth of nearly 94.300 which tested a lower range seen in the first week of May.
Having written the above, the USD/INR has remained elevated and early in February the currency pair was around 90.200. The long-term trend in the USD/INR has remained bullish. The clear technical perspective could lead speculators into believing the price action of the USD/INR is a one-way avenue when a mid-term outlook is taken, but that is where danger lurks for day traders and what makes the Indian Rupee difficult to trade.
Why Thin Liquidity Makes USD/INR Risky for Day Traders
The USD/INR cannot be blindly speculated on via an upwards opinion. The intraday volatility of the currency pair due to its low volumes makes it dangerous for smaller traders to pursue. The use of leverage in the USD/INR and its ability to move via the influence of a single large order from a financial institution causes bursts of price action which is not easily anticipated. The ability of the USD/INR to move in wide breaths, particularly for overleveraged day traders with limited funds in their accounts, makes the currency pair hard to pursue. The viewpoint that the bullish trend in the USD/INR is going to continue might be right mid-term, but achieving success short and mid-term is difficult for those with limited funds.
USD/INR Price Chart
Could Easing Geopolitical Risks Trigger a USD/INR Pullback?
The momentum garnered recently in the USD/INR is an opportunity for day traders via technical perspectives. Alternatively, those same speculators cannot count on the USD/INR intraday gyrations to match their outlooks. Also, while the higher velocity in the USD/INR generated the past two weeks has been evident, there is a potential for a pullback because financial institutions can grow accustomed to risks which are factoring into the recent bullish behavior of the currency pair. For instance, if calmer heads were to prevail in Iranian and U.S conflict, this could mean concerns about higher energy prices will decrease and cause less volatility in the USD/INR.
How Institutional Flows Can Reverse USD/INR Momentum
Although the higher price action in the USD/INR cannot be discounted by traders, they still need to take into consideration – particularly if they are short or near-term speculators – that there is not a constant trend upwards. The USD/INR often shows a habit of reversing intraday via as it is influenced by large financial institutions. Traders need to be open to the possibility that while consideration of the long trend is higher, and that sudden shifts in sentiment and commercial transactions can cause the USD/INR in fact to exhibit lower price action.
USD/INR Short Term Outlook:
Current Resistance: 96.680
Current Support: 96.601
High Target: 96.740
Low Target: 96.550
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