USD INR Trading Review #1– Rupee looks strong versus the dollar in the interim

Rupee traders have been struggling to make big bucks since the “corona dump”. When the US Fed declared the helicopter money of $1200/unemployed US citizen, rupee went into a rude shock from Rs71.1 to Rs76.9 in just under 3 months. Bears were betting for a higher rupee vs the $ but Shaktikanta Das (Papa Das from here on) is the megabull in the house who does not want Indian citizens betting against him. Indian traders were in a shock that Papa Das would pull the rug beneath their trading feet by hoarding US Dollars, and that too a big pile of them. And of course not telling them in advance.

Papa Das at ease while forex traders get REKT

So while USDINR shot up 8.37% during the “corona dump”, Papa Das was adamant to unleash his magic wand to bring it down by 5.55% in the next few months. Check the following chart.

check chart in HD https://www.tradingview.com/x/KAR9YUyW/

Fundamental investors would know that the “corona dump” was a bull trap as India had steady growth of FDI since the start of the year.

Forex trading is really tricky, particularly in the USDINR pair since the key information flow for all RBI activities many a times is not instantly available unlike in more sophisticated environments of the US Fed or the ECB or the UK’s Central Bank. Additionally, the forex as a sector have poor coverage from Indian financial publications. And information is the key to having an edge in these markets. Hence if you trade uni-directionally for the USDINR markets – it’s equivalent to driving a bike in “maut ka kuan”. Here is a photograph of the same.

Trading USDINR be like…

At a closer look, RBI’s balance sheet is healthy too.

It only makes sense to open bidirectional positions if you are trading USDINR pair. I am yet to ascertain if the options markets are liquid enough to trade this pair in India as a straddle makes sense. I think I am yet to meet a trader from India who can safely claim he trades this pair in profits!

Let us visit the charts for technical analysis.

On a monthly scale, Rupee looks strong caught up in a “rising wedge” pattern. This pattern is bearish in nature, yes Rupee is looking strong for now.

check chart in HD https://www.tradingview.com/x/c6b4fjtw/

There can be two scenarios at play for the coming few months. Since Papa Das is so bent on artificially controlling the inflation, Rupee will get stronger over the months it seems. Most likely the price struggles in the wedge pattern for the next 3-4 months until a breakout.

check chart in HD https://www.tradingview.com/x/LBhrmorE/

The bullish scenario is if the “rising wedge” pattern validates itself like this.

People who trade cautiously and apply technical analysis know the “measured move” rule. The width of the rising wedge is the measured move when the rising wedge validates itself as seen above in the photo. So, in this scenario the current resistance stands at Rs76.43 per USD. THIS CASE IS WHAT DREAMS ARE MADE OF. I am just painting it for technical analysis (TA from here on) purists so that they don’t come after me for not applying the ‘rules’ of TA.

check chart in HD https://www.tradingview.com/x/9RAuCuu1/

If this case happens then we will see Rupee getting stronger against the Dollar by 19% from the current high. Boy if this happens then the sun rises from the west and Manmohan Singh will be dethroned by the best economist India ever produced – Shree Narendra Modi ji. Kind apologies to Shree Amartya Sen ji and Shree Raghuram Rajan ji as well. Pun intended. Can you really imagine Rupee back to Rs60 per dollar?

Let us move on from fairy dreams.

Time to apply wave theory for the possible price forecast in the bearish case. Short term wave 4 might bring interim cheers to Rupee bulls but wave 5 is where the surprise is. Wave 5 is purely owned by Papa Das and no one else. Investors who always crib that “markets are manipulated” now know who manipulates the Indian forex market. But you always knew it right? You were just in denial.

https://www.tradingview.com/x/Z80iqEYR/

Bulls can cheer for a while when Rupee hits Rs72, but it is then when it starts behaving like your moody girlfriend. Wave 5 is when the bearish case realises and will lead us to INR80 per USD. Phew. Time to find a job in Dubai or the US in the next 2 years, I guess. Well do not lose hope. We are certainly making money in this pair in this year for sure. Let us take a closer look on trading this mofo pair on a different timeframe, selecting the weekly.

https://www.tradingview.com/x/W6bR1Uny/

There are so many bearish confirmations for the USD to fall.

  1. The bull trap was the possible bullish flag which failed. Call it a flag or a bullish triangle, it failed.
  2. Subsequent bearish candlestick formations in the flag. Bearish engulfing to bearish marubozus.
  3. Currently the price seems to be navigating under a bearish flag.

Target is marked in the box. Range Rs72-70. It will make headlines, and many will take credit.

Does it get any easier than this? Go make bank boys.

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