We expect the Indian rupee to lose grounds against the USD in the short-term,
- First of all, in yesterday’s price action, USD/INR has formed a bullish hammer candle, as the USD recovered its loss against the Indian rupee and was up for the day, by the end of the trading day. The chart above also shows RSI divergence along with the hammer, suggesting further weakness in INR against the USD.
- Moreover, a shift in the retail sentiment seems very likely, which has so far been one of the reliable short-term indicators, looks very likely. Retail sentiment data from the USD/INR are largely used as a contrarian indicator since the retail sentiment tends to move in the opposite direction of the market.
- The most popular options market sentiment indicator is the put-call ratio (PCR). This week, the retail sentiment based on data from the National Stock Exchange (NSE) is signaling a shift. As of today, the PCR is at 1.11, suggesting retail positioning are more on the short side, which gives the pair a bullish bias.
- However, the broader trend still favors the bears.