Currency market update: Will the Indian rupee tender well?

The rupee is projected to do well as risk-averse emotions revert and the dollar index remains steady. To learn more, keep reading.

The USD/INR opened 10 paise higher in the domestic market today. Asian currencies remained mixed versus the dollar notwithstanding the divergence in events. On Friday, Asian equities were neutral as investors focused on incoming data from the US labour market. Having said that, with the impending surge in Omicron (a new COVID-19 strain), Southeast Asia is on high alert. As a result, the dollar fell marginally, and oil rose to a seven-week high due to supply constraints. 

In the overnight session, the Yen also gave up some of its gains. Hedging and speculative flows were observed to influence price movement. The equity market had some turbulence ahead of the US jobs report, which complimented the implied volatility in 10-year government yields, which stayed elevated overnight. Rising gilt yields caused the pound to decline 0.2 per cent to 1.36, boosting the Pound/Euro pair. The US Fed's aggressive tone on Thursday drove US Treasury bond rates above 1.7 per cent. This also contributed to a 14-paise increase in the spot USD/INR. 

Furthermore, ahead of the weekly expiry, the January futures of USD/INR produced a Doji candlestick pattern, indicating traders' indecision. The pair's current support level is 74.10, while resistance is located at the 100, 50, and 20-Day Exponential Moving Averages (EMA). Even though the Moving Average Convergence and Divergence (MACD) has moved slightly northward, it is still in the negative region. 

The Relative Strength Index (RSI), on the other hand, has crept out of the oversold zone but remains flattened, indicating consolidation. We expect the pair to fluctuate around 74.50 in the short term. The general technical setup of USD/INR remains negative, with a short-term consolidation range of 74.70 to 74.10.