Pound Forecast to Strengthen Further Against Indian Rupee as Neckline of Double-Bottom Basing Pattern Occurs
Despite losses over the past 24 hours, the GBP has not yet completed its advance against INR suggest our studies.
The Pound has rallied against the Indian Rupee since August 15th when a broad-based recovery in Sterling was initiated.
The catalyst behind the move was a string of positive UK data releases which include record recoveries in the Manufacturing, Construction and Services PMI’s.
The data helped dampen fears that the Brexit vote would trigger economic recession as businesses withdrew expansion decisions owing to the climate of uncertainty.
The Pound’s rally however stalled on Tuesday the 6th as traders sought to book profit on the recent rally.
From a technical point of view longer-term charts are quite bearish for the pair, but shorter term the opposite appears true - thus we caution bulls against overleveraging.
The pair has broken clearly above the neckline of a double bottom, and is now expected to rise up to an upside target at 90.1900 calculated by extrapolating 61.8% of the height of the pattern higher.
The confirmation for more upside would come from a move just above the current 89.0500 highs.
The MACD moving above its zero line promises further upside too.
Rupee to Enjoy Longer-Term Support
The Indian Rupee was expected to gain strength from the news that Urjit Patel was made the new head of the Bank of India, as he is a monetary hawk.
This means he is committed to tackling inflation rather than lowering rates to foster growth, however, the Rupee’s reaction was quite muted to the event.
An expected rise in Indian bonds is also forecast to support the currency longer-term.
Diminishing hopes of a US rate hike will have further helped the Rupee which like other Emerging Market currencies tends to take a hit from higher US borrowing costs since a high proportion of its debt is dollar denominated or originates from the US.
Ultimately we would expect the INR to start strengthening again and the longer-term downtrend in GBP/INR will therefore likely extend in line with our observations of the pair's longer-term charts.
