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Rupee-Yen stuck in a range PDF Print E-mail
Written by Our Staff Writer   

Published in DNA India
June 6, 2011: The tremors in Rupee-Yen (INRJPY) pair following the earthquake has ended with the pair stuck in a narrow range for nearly a month. This essentially means that routine trading the pair is back.

The pair however has to break out of the range to find a sustainable trend without which there is not much money to be made trading INRJPY. All of last month the pair has traded in the 1.7850 - 1.8190 range and a close above or below that zone will give price direction. A close above should take the pair to 1.8500 and a close below can drive INRJPY down to 1.7230.

INRJPY tends to be range bound sometimes for long periods of time. In fact the pair was moving between 1.80 and 1.87 from September 2010 to March 2011. This essentially makes it a great pair for range trading, where the strategy is sell at the top of the range and buy at the bottom of the range.

In the early March 2011 the pair broke out of a range following the earthquake in Japan. Initially the Yen appreciated, then fell drastically only to move up again all in the pan of three months. It's only now that the pair has steadied in the 1.7850 to 1.8190 range.

Ideally, we'd trade both the ranging and trending price action in the pair. Only in the last month the range has been narrow making it difficult to get good profits. Once the pair breaks out a consolidation zone the rally is often pretty strong, which provides a very good profit potential.

Dollar index

The market proved us wrong last week. We had predicted that the index would bounce from its support zone of 74.40 to 74.70. However a slew of bad economic data on US manufacturing and employment pushed both the greenback and global equities down.  The dollar index closed at 73.78 last Friday and the next support zone is at 72.71-73.05, where the greenback could bounce. Below that the range of 70.75-72.08 is an extremely strong support level, which can stem the dollar sell off.

Rupee-Euro

The Rupee has been on a bearish trend against the Euro since May 2010. However, the bearish trend may break if the price action of last month is any indication. The pair rallied sharply from 0.0151 in early May 2011 and is now slowly retreating close to that level. There is a decent support zone to long on the pair between 0.0151 and 0.0153 with a stop a little below the 0.0151 level.