USD/INR expected to trade with negative bias; 70.40 likely in coming days


As expected, the Dark Cloud Cover pattern in the previous week has played its part.

USD/INR retreated from the higher levels and again entered in a trading range.

The flattish trend of medium and short term exponential moving averages are depicting the dilemma of traders. The currency pair was under pressure throughout the week and closed with a loss of 0.27 points on a weekly basis at 70.82.

Moving forward, in this truncated week, traders can expect the currency pair to remain under pressure and trade with negative bias.

The red candle on the weekly chart preceded by the Shooting Star pattern is giving an indication that bulls are tired and likely to correct from current levels.

RSI is giving the signal of range shift and moving from bullish zone to sideways zone.

On the daily chart, prices are trading below 20-DMA, indicating that weakness is expected in the coming days. Intraday charts are also suggesting a short-term supply in the currency pair.

On an hourly chart, the momentum indicators are trading in a bearish zone and prices are tagging the lower Bollinger Band. This band walk is expected to continue till 70.40.

We believe that traders can trade with negative bias during the week and look for selling opportunities at the current market price and on any rise for the expected target of 70.40.

The upside for time being seems to be capped at 71.70 level and until we are trading below it, a bearish approach should be adopted.

Trading strategy

Traders can go short in ATM call option of 71 at 0.12 of the November 1 contract and buy 71.5 OTM CE at 0.025 to cap the negative returns.

(Note: Option premium as on 25th October closing price.) (The author is a Senior Research Analyst at Rudra Shares & Stock Brokers.)

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