Potential for Rebound in Pound to Rupee Rate as a Box Consolidation Pattern Forms
The GBP/INR exchange rate has traced out a new range following the recovery from the exhaustion spike lows.
With targets to the downside now met there is a potential for a rebound.
GBP/INR has been trading in a narrow range recently, oscillating between 0.81 and 0.8220.
An exhaustion bar formed on the day of the flash crash lows indicating exhaustion and the potential for a rebound so we retain a slightly bullish bias for the pair.
The MACD crossing its signal line is another indication of further upside for the pair.
A move above the box highs at 0.8220 would confirm more upside to a target at 84.0000.
A less likely but still possible bearish scenario would gain confirmation from a break below 80.0000, which would lead to a move down to support at 78.8500.
The pair reached several major long-term targets since breaking down due to Brexit fears.
The minimum target from the double top reversal pattern on the monthly chart was at 83.5000 and has now been surpassed.
This adds to existing expectations of a rebound.
INR set to appreciate, say J P Morgan
The rupee is set to appreciate compared to most other Asian currencies, say analysts at J P Morgan, who remain long the Rupee against the Korean Wong for example.
They see the Rupee supported by increasing inflows of foreign investor cash seeking to purchase Indian stock and bonds, which are benefiting, increasingly from a positive outlook.
This is due to heightened expectations that the Reserve Bank of India (RBI) will continue cutting interest rates.
The recent fall in inflation to 4.31% from 5.05% is likely to lead to another rate cut from the RBI, as it was lower than that expected.
Overall the outlook from a growth and fundamental perspective remains positive.
Investors also consider Indian assets as providing a relatively high yield but stable alternative to lower yielding developed market assets in the current low yield global environment.
