Sunday we wrote a post reiterating our long-term view that the path of least resistance in the Rupee remains lower.
With that said, we were a bit cautious about buying the potential breakouts in USD/INR and JPY/INR until we got confirmation, but we’ve seen some solid follow-through over the last two days.
This post will outline how to approach getting involved in the trade if you’re not already.
Tactically when we look at USD/INR we’re right in the middle of a wide range right now. On the downside, we have the breakout level near 72.25 and on the upside, we have the closing higher from late 2018 at 74.50. That leaves us two options.
Click on chart to enlarge view.
First, wait for a pullback down towards 72.25-72.50 range and enter the trade there as the pair retests its breakout area. Given the sharp rally we’ve had over the last 4 days, a pullback of that magnitude wouldn’t be surprising.
If we don’t get a pullback however, all is not lost. The closing highs from 2018 at 74.50 are likely to pose some resistance in the near-term if/when prices do get up to that level. What we’d be waiting for is a few days or weeks consolidating below that level, so that we can buy the subsequent breakout to new highs and target 77.60 on the upside.
In either case, our target remains the same as it has been all along, 77.60.
The other pair we find to have well-defined risk is Yen/Rupee, which has finally broken above resistance near 0.67. As a result, that resistance level now becomes our floor that we can buy it against as our objective remains the 2012 highs near 0.72. Any pullbacks toward that 0.67 level should be welcomed as a buying opportunity.
Overall, from a structural perspective Rupees remain vulnerable to further downside. With that said, if you’re taking a shorter-term approach to trading these pairs, then USD/INR and JPY/INR offer the cleanest reward/risk setups of the four and this is how we’d approach them.
Thanks for reading and let us know if you have any questions!