USD Slams Into Major Resistance

Ultimately, this is a scenario where I think we probably just got a little overextended, so short-term pullback makes the most sense.

The US dollar spiked during the trading session on Thursday as the Russians invaded Ukraine. Because of this, we have seen a lot of ugly behavior, and quite frankly it is worth noting that the Indian rupee of course being a relatively thinly traded currency got hammered by the greenback. After all, there was a huge run towards safety, as yields in America felt quite drastically. That being said, we slammed into the ₹75.50 level, and even almost hit the ₹76 level which was the following resistance barrier.

That being said, this is a market that I think will continue to see a lot of noisy behavior but ultimately, we have a scenario where the market may have gotten ahead of itself, so a short-term pullback would make a certain amount of sense, especially if we have some type of cooling of global tensions. The West did not choose to go overboard with sanctions or even bring troops to bear, so it does make a certain amount of sense that we may get a little bit of a relief rally and risk assets. That being said, I do not know that the Indian rupee is the first place I want to put money, and therefore I would think that there will be more or less a “buy on the dips” type of mentality. Furthermore, all it would take is a flareup in aggression in the Ukrainian region to send this pair back to the upside.

The market will continue to pay close attention to the Federal Reserve, because there will be questions as to whether or not they will be able to raise interest rates as quickly as once thought. Because of this, that could give EM currency such as the Indian rupee a little bit of an opportunity to gain strength, as it could take out the idea of the interest rate differential being a major issue. With that, I think you have a scenario where the markets will have to pay close attention to the Federal Reserve, as well as geopolitical actions. Ultimately, this is a scenario where I think we probably just got a little overextended, so short-term pullback makes the most sense. I would look for support near the ₹75 level, and then the 200 day EMA underneath.