Finally A Breakdown Confirmation In USD/INR?
First, let's start with a weekly chart of US Dollar/Rupee to identify the structural trend. Clearly, for the last decade, we've had a series of higher highs and higher lows, meaning prices are in an uptrend. With that said, when prices broke out to new highs in March momentum diverged negatively, prices stalled, and have been bleeding lower ever since.
Now, this pair is threatening to break back below its 2018 weekly closing highs near 74.50, which would confirm a failed breakout. And if we've learned anything from our work over the years it's that failed moves tend to lead to fast moves in the opposite direction, so this could potentially be a big development that points towards the next major support level near 69.
Click on chart to enlarge view.
And here's a closer look at this potential breakdown.
So if prices are breaking down, why is there a question mark in the title of this post? and why are we saying POTENTIAL breakdown?
The reason is that there has been a lot of back and forth price action in this pair, so we want to be waiting for a weekly close below the 2018 highs at 74.50 to confirm that there has been sufficient downside follow-through and that sellers are now firmly in control.
Everyone has their own way of approaching this and there's no clear-cut right or wrong answer here.
For us, our focus is on the weekly closing price from 2018 and therefore we want to wait for a weekly close below that level before getting aggressive on the short side.
We also think that the breakout retest occurring in Euro/Rupee will be a big tell as to whether this is simply a US Dollar story or if the Rupee is setting up for a broader-based rally against all four of the major pairs we track.
If the Euro/Rupee pair breaks back below 86.50 on the daily chart, that would be a sign that there's a bigger story here.
The other thing to note is that each person's data is going to look slightly different depending on the exchange data they're getting, whether they're looking at the spot or futures price, etc.
The constant remains those highs set in 2018. If prices are above that in USD/INR, then we cannot be short, but if prices break decisively back below that level (however you choose to define that breakdown in your process) then this failed breakout is confirmed and we want to be shorting this pair with a target near 69.
Regardless of whether you're trading this or not, it's important to keep an eye on because of its intermarket implications. And hopefully, we'll get our confirmation this week.
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Thanks for reading and please let us know if you have any questions!
Allstarcharts Team