Indian rupee remained stable today, with reaction muted following the latest announcement of the policy Central Bank of India. To be honest, the central bank did not surprise the market, opting to keep interest rates at 8% as expected. What is more surprising was the accompanying statement in which the governor Rajan said the central bank will not tighten monetary policy if inflation is on the way to the bank's target.
Time Table
This is actually a relatively accommodating attitude and we should have seen a kind of weakness in INR but did not happen. Prices have bounced from a day low of 59.0 and pushed all the way to 60.05 within hours that followed, but USD / INR quickly fell back again.
From the technical point of view, this suggests that bearish momentum in USD / INR remains strong as we are trading below the rising trend line and the confluence with 60.00 round number. In addition, the latest rally has not even create a new weekly top, even if the fundamental case for USD / INR rally has been stronger than yesterday. They suggest that prices may be able to retest the low current day and the probability of a move towards a low-extension and more bearish on Friday is possible if the bearish sentiment continues to prevail for the remainder of this week.
Weekly Chart
Weekly Chart is less optimistic bearish outlook, however, that prices are likely to find support from the Figure 59.0 round which was the support of floor area for consolidation in July 2013. stochastic readings agree that the indicator is at the most oversold level in a year, which promotes the upward movements by outside. This may not necessarily invalidate the bearish momentum, but at least we could see some form of upward withdrawal to the aforementioned consolidation ceiling before a move to the Channel Bottom up can begin.
Basically, nothing has changed. Inflation in India remains high while the economy continues to remain in the pits. The only difference is now that the market is more bullish on emerging markets, resulting in a wider strengthening of emerging market stocks and currencies. On the other hand, the USD strengthening narrative got stronger because of the index Fed President Janet Yellen earlier than expected rate hikes. Given this, we should expect more USD / INR instead of down, and the current bearish momentum may be difficult to maintain in the long term
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