USD/INR hit a low of 69.435 yesterday before closing at 69.64, having opened at 69.74. Essentially, the currency pair created a hammer candle, which is widely considered an early warning of a bullish reversal.
The trend change, however, would be confirmed if the spot closes today above 69.7825 (previous day’s high), validating the hammer candle.
A bullish close, if confirmed, would open the doors to 70.30-70.50. That looks likely as the 14-day relative strength index (RSI) is reporting oversold conditions with a below-30 print and the 4-hour chart RSI has diverged in favor of the bulls.
Further, the RBI is likely not comfortable with the recent surge in the rupee. The central bank has announced a buy-sell swap aimed at infusing liquidity into the system and capping upside in the INR.
Under the plan, the RBI will snap up 5 billion dollars on 26 March for a period of three years and reverse the transaction sales at pre-determined rates via auction.
Daily chart
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Trend: oversold bounce likely
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