USDINR: (Intraday bias- Range bound.
Support Feb futures – 82.95 and 82.85
Resistance- 83.10 and 83.20)
USDINR appears to be maintaining a tight range, fluctuating between 82.80/90 support and 83.20 resistance levels on the spot. Traders are recommended to consider buying near the lower boundary of the range, setting stop-loss orders below 82.80 on a closing basis. Conversely, for those inclined to short positions near resistance, it's advisable to maintain stop-loss orders above 83.20 on spot. If prices breach and sustain above 83.20, the upper limit of the range may extend towards 83.45/50 levels on spot.
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For traders employing short straddle or short strangle strategies, it's crucial to exercise caution by implementing adequate stop-loss measures. Additionally, it's advisable to keep position sizes smaller than usual due to historically low option premiums.
The subdued forward premium or lower carry, possibly influenced by diminished volatility, could be a contributing factor for the central bank's reluctance to permit significant USDINR volatility. Hedgers and carry traders typically assess volatility-adjusted carry, and the prevailing low volatility levels have resulted in a decade-low forward premium. While this might not raise immediate concerns, an expansion in volatility could prompt the unwinding of carry trades, attracting long dollar hedgers into the market, thereby amplifying the upward trend.
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