Will USD/INR and the Stock Index Reverse Next?

Indian Rupee, USD/INR, Nifty 50, Double Top, Technical Analysis – Talking Points

  • Indian Rupee pressuring familiar support against the US Dollar
  • USD/INR may bounce given that downside momentum is fading
  • Nifty 50 extended losses to the 50-day SMA for a turning point?
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Indian Rupee Technical Analysis

The Indian Rupee may be at risk against the US Dollar in the short term. USD/INR is trading around the 72.76 – 73.00 support zone that was established back in early September. Moreover, recent price declines have been met with positive RSI divergence. This is a signal of fading downside momentum which can at times precede a turn higher.

In the event of a climb, keep a close eye on the falling zone of resistance from early November. This could reinstate the focus to the downside. Beyond that sits a long-term falling trendline from April 2020. From a fundamental standpoint, weaker Indian inflation has raised prospects of further easing from the Reserve Bank of India which can offer some upside pressure for the pair down the road.

But recently, the IMF estimated double-digit growth for the Asian economic powerhouse, contributing to recent gains in the Indian Rupee. A breach through key support would subsequently expose the former zone of resistance between 72.14 and 72.40. This area may come into play as new support and establish itself as a key inflection range.

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USD/INR Daily Chart

Indian Rupee, Nifty 50 Outlook: Will USD/INR and the Stock Index Reverse Next?

USD/INR Chart Created in TradingView

Nifty 50 Technical Analysis

Recent volatility in global financial markets made its way into India’s benchmark stock index, the Nifty 50. In fact, the index extended losses after prices formed a bearish Double Top. Losses have brought the Nifty to the 50-day Simple Moving Average (SMA) – light blue line on the chart below. This also followed the presence of negative RSI divergence as upside momentum faded.

A break under the 50-day SMA would expose a potential long-term rising trendline from March 2020 which may reinstate the focus to the upside. Otherwise, a drop through may place the focus on the early 2020 highs for a potential range of support between 12246 and 12430. Resuming the dominant uptrend entails a push above the current all-time high at 14753.

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Nifty 50 Daily Chart

Indian Rupee, Nifty 50 Outlook: Will USD/INR and the Stock Index Reverse Next?

Nifty 50 Chart Created in TradingView

— Written by Daniel Dubrovsky, Currency Analyst for Finance Prop.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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By Jonathan Prop

Jonathan Prop is an independent financial advisor. He has been working in finance for the last 20 years. After retiring early in his 40s, Jonathan decided to help others get to grip with financial markets, particularly his area of expertise - forex!

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