[Premium] Explosive Resolution Ahead In Rupees

Let's start with US Dollar/Rupee which has been our proxy for the remaining three pairs, given it is showing the most relative strength.

After a successful breakout above 74.50 and meeting our upside objective of 78, prices have been consolidating in a "high and tight" flag, which is traditionally a continuation pattern.

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When price action (volatility) contracts, we tend to see explosive moves come from the resolution. All of the pent up supply/demand that's trapped within the pattern gets released and we see a sharp move in the direction in which it resolves.

Given the underlying trend is higher, we'd expect a breakout above 78 to occur and a fast move towards 84 to occur over the next month or two. BUT, if prices resolve lower instead of higher then that would suggest larger forces are at work here and a trend change in Rupee may be underway.

Either way, the resolution from this range is likely to be a violent one and provide us with a lot of information about the health of the Rupee's intermediate/long-term trend.

Here's the Yen/Rupee in a similar period, consolidating tightly in the middle of its 0.67 to 0.74 range.

And Euro/Rupee consolidating tightly between support at 80 and resistance at 86.50.

Finally, Pound/Rupee which remains the messiest of the pairs, but is managing to hold above former highs of 95.40 for the time being.

Ultimately, these pairs are going to move together, likely lead in the direction of USD/INR which also happens to be the cleanest trade setup from a reward/risk perspective. Given the long-term trend is higher and momentum is in a bullish regime, we'd expect an upside resolution this week.

Regardless, whichever way this consolidation breaks, we need to be paying attention as history suggests tight contractions lead to sharp expansions when it comes to volatility.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team