FxWirePro: Option sentiment suggests further decline in INR against USD

INR to remain under selling pressure,

• In late March, we warned our readers that after strengthening from 71.5 in February to 68.4 in March, the INR could actually weaken going forward against the USD, as the option sentiment flipped for the first time since early February.
• The put-call ratio (PCR), which is one of the most popular option market indicators was higher than 1, suggesting retail traders are now biased towards a further downside in USD/INR, which gives the pair a bullish bias.
• Options sentiment has been one of the most reliable indicators when forecasting INR. And as anticipated the INR has indeed weakened against the USD.

Trade idea and retail sentiment:

• In addition to the sentiment, we also pointed out that USDINR cash market price actions had formed a bullish hammer candle, while future formed a bullish ‘Dragon-fly’ Doji candle in the weekly chart, which gave the USD/INR bullish bias.
• We had forecasted that USD/INR would soon test resistance around 70 area. USDINR today tested 70 resistance area in the cash market trading.
• And options sentiment is suggesting that it might continue to climb. As of today, the PCR is at 1.47, which suggests that retail positions are biased on bullish INR, which gives the currency a bearish bias against the USD.