Currency Action: USD is yet to discount higher yields

Higher crude oil price, stronger dollar index and domestic weakness will aid the USD/INR pair to add strength. Read on to find out more.

Asian currencies may weaken against the Dollar on risk-off sentiment spurred by losses in regional equity markets and U.S. stock futures, ahead of the Federal Open Market Committee (FOMC) meeting next week. On the domestic front, corporate dollar bond inflows could help USD/INR to open slightly lower but as the trading progresses higher crude oil price, stronger dollar index and weaker domestic will play their role in adding strength.

USD/INR began to move in a downward sloping channel after making a high of 77.42 in March 2020. However, it seemed like it gave a breakout from this channel in December 2021, but later it turned out to be a fake breakout. Further, it started heading downwards to make a low of 73.69 in the second week of January 2022 and retraced back from its 61.8% Fibonacci level. This week seems to be optimistic as it surged from the last week’s low and made a high of 74.68 breaching its 50% Fibonacci level and is presently consolidating at the same level from the past two days.

Yesterday, USD/INR formed a Doji candlestick pattern indicating indecisiveness. As far as trend is concerned, then it is trading below its nine-day, 20-day and 50-day exponential moving average (EMA). The major resistance faced by the pair is at 74.88 levels, which is also its 38.2% Fibonacci level.

The momentum oscillator, 14-day Relative Strength Index (RSI) is heading north and currently placed at 46.6. MACD has been placed below the zero line but given a positive cross over indicating the short term trend reversal. The pair is presently taking support at 50% and resistance is placed at 38.2% Fibonacci retracement. The USD/INR pair is expected to trade in the range of 74.88 to 74.39.