Can rupee touch 80 per dollar in the medium-term?
The leading indicator RSI is also out of the squeeze. It made parallel tops and higher lows.
After 111-week of consolidation, the USD/INR has broken out of the cup-like pattern with an above-average volume in the previous week. An important point to note here is that this cup-like pattern is not a perfect textbook pattern but just resembles it.
The rising inflation and Federal Reserve's rate hike fuelled the rally in the dollar. The rally in the dollar index (DXY), for the sixth successive week, is the main reason for the depreciation of the rupee. DXY has broken out January 2017 high as well as the prior swing highs. The rectangle breakout of DXY is likely to see another 15 per cent upside potential. The breakout targets are placed at USD 128-130.
As DXY strengthens, the Indian Rupee may further weaken in the near future. The 111-week cup depth is about 6 per cent. As long as the USD/INR trades above 76.5, the target is open to 79-81 in the short term. The leading indicator RSI is also out of the squeeze. It made parallel tops and higher lows. As the breakout is already in place, the trend is clearly on the upside. A sharp rise in the USD is highly likely.