Currency market update: Rupee falls below the critical level of 75

The USD/INR pair attempted to surpass its psychological threshold of 75 this week, but it has ended today's trade below it. So, what does this mean for the traders? Let us investigate.

After reaching a swing high of 76.524, the USD/INR pair fell to a swing low of 73.690. However, it began to rise again from this point. Following a brief pause at 74.238, the pair resumed its ascent at the start of this week. Although it attempted to break the key level of 50 per cent Fibonacci at 75.1, it retreated from there in today's trade to make a low of 74.874 and is presently trading around its crucial level. 

The Indian rupee began the day at a high and has subsequently fallen. Due to the rise in global markets and US futures, we may see short-covering and unwinding of holdings. Nonetheless, trade volumes may remain weak ahead of the Union Budget, on Tuesday, February 1, 2022. The dollar's mood has stayed favourable following the Federal Reserve's policy normalization and hints of a rate rise in the March policy meeting. Although most Asian currencies traded down against the dollar, they are expected to rise after the market has completed its review of the Fed's monetary policy outlook. 

In terms of technical analysis, the USD/INR February futures contract finished comfortably above its 55-day exponential moving average (EMA). The pair also retraced 61.8 per cent of the Fibonacci level next to the last swing high of 76.52 to the low of 73.69. On the hourly chart, the pair has shown a neckline breakout of an inverted head and shoulder pattern.  

The target appears to be around the 75.87 level. This happens to be at the 78.6 per cent Fibonacci retracement. Momentum oscillators have become positive on the daily chart, indicating bullishness. The pair is projected to move higher, with resistance around 75.44 and 75.92 and support at 74.77.