The GBP/INR pair has broken above key highs as buyers return to pound sterling, we ask if we are witnessing a reversal in the downward trend or a mere short-term correction.
The British pound has been in demand of late as global currency markets accept they may have been overly negative on the UK currency with regards to the UK referendum.
Just how far the recovery can extend is up for debate and we have already heard some big-name analysts warn that this could be as good as it gets for GBP.
The break above the 96.70 highs has confirmed a new, short-term, up-trend.
A clear break above the 97.308 highs, including a margin of comfort - so above 97.40, would probable confirm a move all the way up to the next major obstacle at the 98.100 level, where a mixture of old monthly support turned resistance levels and the R2 monthly pivot (a level traders use to counter-trade the dominant trend) are likely to contain the exchange rate.
The move has been inspired, broadly by a rise in the pound rather than a fall in the rupee, as a result of a reduction in fears the UK will leave the EU, when it votes in the in-out Referendum on June 23.
There is no big data out this week or the next from India so the pair's fluctiuations will probably be determined by UK drivers, primarily Brexit concerns.
Recently the ‘Remain’ campaign pulled away and increased its share of the votes after having been neck-and-neck with ‘Leave’ for several months, and this helped sterling.
Evidence from phone polls that the high number of undecided voters, estimated at 15%, would probably vote to Remain, if pushed to come down on one side or another, has also supported the pound, as it is their votes which are expected to ‘swing’ the Referendum for the winning side.
Betting companies now place the odds of the UK remaining in the EU at 70%, which is fairly solid.
Most analysts also agree it is unlikely the UK will vote to leave.
If it does the pound is forecast to lose between 15-20% of its value in the aftermath.
Alternatively, if it stays in the EU, the pound stands to gain roughly 8-10%, which is the amount which it is estimated to have lost as a result of Brexit fears so far.