The USD/INR ended the month of April holding onto bullish gains made in choppy conditions, and as May begins traders of the Indian Rupee will face challenging tests.
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The USD/INR enters the month of May having held onto bullish gains, but showing signs of slight technical selling. Traders need to be prepared for the potential of a chaotic week ahead with the USD/INR, as the U.S Federal Reserve announces their key interest rate this coming Wednesday. The Fed is expected to raise interest rates by half a basis point – meaning an additional 0.50% will be added to the current rate.
The U.S central bank has let the financial world know in advance its thinking. What day traders need to understand is that a lot of the ‘stronger’ USD results which are reasonable notions, have likely already been ‘baked’ into the results of the USD/INR. Meaning that the USD has been bought on the assumption interest rates from the U.S are going higher. This brings up the time honored idea amongst traders that the rumor should be bought and the fact should be sold.
Some technical traders may not want to know what the U.S Fed is doing and have a disdain for all pronouncements from the central bank, but it may be a good idea to have some knowledge of fundamentals. If in fact the trading adage of ‘sell the fact’ plays out when the U.S Federal Reserve makes their interest rate hike official, the USD/IND is likely to see a significant amount of fast and volatile trading. Speculators with limited amounts of money who cannot afford to wager in the anticipated choppy conditions should be extra cautious early this week.
Technically financial houses still have a couple of days of trading to position their USD/INR holdings before the U.S Fed makes their announcements. This will likely set the table for choppy conditions in the next couple of days. A high of nearly 76.7800 was seen on the 26th of April. It would not be surprising to see this mark challenged again near term. When the interest rate announcement comes from the U.S, traders should expect to see sudden spikes in both directions in the USD/INR develop momentarily.
In March the USD/INR did climb to a record high of nearly 77.1500, and some traders may be wondering if these values will be attained again. This could certainly be the case and traders need to use their risk taking tactics capably to guard against fast moves, and also to potentially take advantage while using take profit orders. If the U.S Fed delivers an interest rate hike, talks about the potential of another move higher within the next two months, speculators should understand this rhetoric has largely been anticipated by financial institutions trading the USD/INR.
Perceived notions of things to come and the actual rhetoric will make for an intriguing week and month of trading for the USD/INR. Speculators who have the ability to wager with the USD/INR will certainly find a volatile range to take advantage of, but the price movement could also prove dangerous.
USD/INR Outlook for May 2022
Speculative price range for USD/INR is 75.2500 to 77.1600
If selling pressure mounts in the USD/INR as a reaction of anticipated moves from the Federal Reserve, downside price action could erupt. The 76.3000 level should be watched, if it proves vulnerable there is reason to suspect the 76.0600 mark could be challenged and if this price vicinity falters, the USD/INR could break lower and move towards the 75.7500 ratio rather quickly. A move below 75.7500 could actually trigger additional tests lower and depths of 75.4000 would not be completely astonishing.
Turbulence within the USD/INR will certainly take place and buying spurts will also likely be seen in the coming days as nervousness prevails. The USD/INR has climbed higher the past week of trading and has held onto some its loftier price range. If buying pressure is demonstrated the 76.7000 level should be watched, if it is broken higher a test towards 76.9300 could be exhibited. Additional moves higher could be generated, but if this occurs they will likely be momentary bursts. Traders are urged to use risk management with the USD/INR.