Introducing USDINR
The USDINR is a currency pair comprised of two currencies: the US dollar and the Indian rupee. The official currency of the United States is the US dollar, abbreviated as USD. India’s national currency is the Indian rupee, also known as INR. They unite to form the currency pair USDINR. This currency pair is regarded exotic since India is still considered a developing country and is matched with the US. It is also the thirteenth most popular exotic forex pair in the forex market. Because both currencies are highly correlated, the USDINR currency pair is quite popular. The USDINR is subject to huge market volatility, making it an excellent pair for range traders to use by analyzing trading patterns.
The United States Dollar
Although the introduction of the dollar is not necessary, it would be unfair not to. The US dollar, abbreviated as USD, is the world’s most actively traded currency. It is the most common currency and is commonly used as a reference currency for all monetary analyses. Pairs of the USD are either called major pairs or exotic pairs.
This money is issued by the Federal Reserve Bank, or “Feds,” as they are more often known. After running out of coins to pay for the Civil War, the first paper dollar was created in 1862. The USD is now widely accepted as a means of payment in numerous financial markets throughout the world. Several nations have transformed their currencies to become dollars in order to improve relations with this large powerhouse. These countries include New Zealand, Canada, and Australia. Because the US dollar is the most widely used currency in the world, each major economic event occurring anywhere in the world has an impact on it.
The Indian Rupee
The Indian rupee goes by INR in the forex space. It is the national currency of India. The Indian rupee was named after a silver coin called rupiya in the 16th century. It is among the most popular currencies in Southeast Asia. This valuable currency is issued by the Reserve Bank of India. Over the years, the quality and markings on the Indian notes have significantly changed in order to become more secure and harder to replicate to prevent fraud. The Indian notes are known for being quite vibrant in color and rich in history as it displays some of the most important historic sites. In 1927, the value of the INR was fixed to the British pound. In 1946, this fixation broke and it got fixed to the USD instead. From 1975, the Indian rupee was finally a freely floating currency.
Why Trade USDINR
The USDINR currency pair presents some unique circumstances because it is an exotic currency pair with markets that are highly correlated to one another. Here is why you should trade the USDINR:
Market Correlations
A compelling reason to trade currency pairs like the USDINR is their high correlations with other market assets. This is seen in the Indian rupee, which has significant connections to commodities like petroleum and jewelry. This is due to the fact that India is a big exporter of these items. This is also true for the US Dollar, which is tied to commodities like airplanes and ships. As a result, trading this pair becomes even easier since if we understand the direction of the commodities market, we can easily comprehend the direction of the USDINR market. We’ll go into how these commodities will affect the movement of the USDINR in more detail later.
Exotic Currency Pair
The USDINR is an exotic currency pair in the forex market. An exotic currency pair consists of the US dollar and the currency of a developing or less popular country. In this scenario, the US is joined by India in establishing the USDINR currency pair. An exotic currency pair adds additional trading opportunities to the forex market. Major and minor currency pair market fluctuations may become boring and repetitive to track all of the time. Traders diversify their portfolios by trading uncommon currency combinations. The USDINR is one of the market’s most popular exotic currency pairings, as well as one of the most fascinating to trade.
Market Volatility
The USDINR is a unique currency pair. As a result, it is subjected to quite different market conditions than the rest of the other forex pairs. The USDINR enjoys relatively steady market conditions most of the time. This is mostly because it is an exotic pair with low trading volume. It does, however, show signs of instability when a huge event happens. The good news is that these chaotic moments are quite predictable. This suggests that experts who are ahead of the dynamic duo can predict when this currency pair will face volatile market conditions. As a result, the USDINR is quite popular with range traders, who take advantage of periods of volatility to make a fast profit.
USDINR Trading Tips
Since the USDINR is an exotic currency pair, it faces quite unique market conditions as compared to major and minor currency pairs. Here are some tips to trading an exotic currency pair like the USDINR:
Range Trading
Range trading is the practice of determining when to initiate a trade by using support and resistance levels. The resistance levels are represented by the highest points on a given chart. Similarly, the lowest points on a specific chart are the support levels. Understanding where these highs and lows are located is crucial to the range trading strategy. For instance, if the price is approaching a resistance level and you believe it will hold, you may make a SELL transaction. If, on the other hand, the price is reaching a level of support that you believe will hold, you may execute a BUY transaction. If the price falls below support, you can start a short position because the support level will no longer be legitimate. Similarly, if the price continues to rise over the resistance level, you may go long since the resistance level will be invalidated.
Trend Trading
Trend trading involves detecting trends on trading charts and using them to make trades. Identifying an uptrend and a downtrend are two of the most common patterns that traders look for. These represent bullish and bearish market conditions, respectively. The market is in an uptrend when both the highs and lows climb. The market is in a downtrend when both the lows and highs decrease. Because trend patterns can be identified simply by looking at a chart, this is a simple trading method that everyone can learn. Because the USDINR is recognized for having long upward and negative trends, this is a great strategy for this currency pair.
Pullback Trading
Pullback trading occurs when the market breaks away from its trend for a limited period of time, allowing you to enter at a low cost. To trade a pullback, you must first forecast when the market will fluctuate. If the USDINR is in an uptrend and momentarily breaks and falls, you can enter the market at a reasonable price with a BUY transaction. Similarly, if the market is in a downtrend and momentarily breaks and increases significantly, you may be able to enter the market at a reasonable price by using a SELL trade. In a sense, this is a straightforward yet successful approach for trading the USDINR currency pair.
Factors Affecting USDINR
The US and India markets are highly correlated to one another. This is because they are one of each other’s greatest export destinations. This presents some unique factors which impact their trading circumstances. Here are some factors impacting the USDINR:
Gross Domestic Product
Gross Domestic Product, or GDP, is a measure of a country’s total economic performance. It has a significant influence on the volatility of the USDINR pair.
A positive GDP figure indicates that the economy is prospering. This, in turn, would encourage investors to invest in the country’s economy, enhancing the country’s currency’s worth. If the US has a strong GDP, the US Dollar will rise, causing the USDINR to rise as well. However, in the case of the Indian rupee, the reverse is true. If India’s GDP grows, the INR will rise, causing the USDINR to fall in value.
The Aerospace Industry
The United States is a large producer and exporter of aircraft and aircraft parts. As a result, in order to develop and expand in value, its economy is primarily dependent on the export of these commodities. Any changes in the aviation market, such as supply or demand, will have an immediate impact on the USDINR pair. If demand for planes grows, the US will export more of them, leading the USDINR to appreciate in value. If demand declines, the United States suffers since it will be unable to export as much, leading the USDINR to lose value.
The Petroleum Industry
India is among the largest producers and exporters of valuable commodities such as crude oil and its derivatives. Therefore their economy greatly depends on the export of these petroleum products in order to thrive and increase in value. Any changes to the market for these commodities such as demand or prices will have a direct impact on the USDINR pair.
If the demand for crude oil increases, India will export them more often, and therefore, USDINR will decrease in value. If the demand for petroleum decreases, India will suffer as they wouldn’t be able to export them as much, and therefore, USDINR will increase in value.
Financial Institutions
Both the Federal Reserve Bank and the Reserve Bank of India are majorly responsible for any instability in the USDINR marketplace. The FRB and RBI release monthly reports and statements regarding updates to any policy changes. These reports also display the economic and monetary forecasts for the upcoming short-term. Any positive results from the FRB will have a positive impact on the USDINR currency pair.
However, any positive results from the RBI will have an inverse impact on the USDINR currency pair. The representatives of these individual banks also hold speeches frequently where they explain these results in more detail. These speeches are just, if not more, important in determining the direction of the USDINR market. From FRB, Jerome Powell who is the President of the institution is highly looked upon for his speeches. From RBI, Shaktikanta Das who is the Governor of the institution is highly looked upon for his speeches.
Interest Rates
Interest rates have a huge impact on the USDINR currency pair. If the United States decides to increase its interest rates, the USD will suffer and will face a drop in value. This would cause the USDINR to also drop in value. However, if India decides to increase its interest rates, the INR will suffer and will face a drop in value. This would cause the USDINR currency pair to appreciate.
The Ships Industry
The United States is a significant exporter and manufacturer of boats, ships, and ship parts. As a result, in order to remain and expand in value, its economy is strongly reliant on the export of these important items. Any changes in the market for these products, such as price or demand changes, will have an instantaneous impact on the USDINR pair. If demand for ships increases, the US will export them more frequently, leading the USINR to improve in value. If demand for boats falls, the United States would suffer since it will be unable to export as many, leading the USDINR to lose value.
The Jewelry Industry
India is among the largest producers and exporters of valuable commodities such as jewelry products. Therefore their economy greatly depends on the export of these jewelry products in order to thrive and increase in value.
Any changes to the market for these commodities such as demand or prices will have a direct impact on the USDINR pair. If the demand for jewelry increases, India will export them more often, and therefore, USDINR will decrease in value. If the demand for jewelry decreases, India will suffer as they wouldn’t be able to export them as much, and therefore, USDINR will increase in value.