Currency traders are watching the Indian rupee as USD/INR is at an important inflection point that should set the tone for this pair in 2019. Here's what we're watching for clues into its next major move.

Almost exactly five years after setting an all-time high in 2013, USD/INR broke out to new highs, confirming a structural breakout that targeted 80 over the long term. Prices quickly rallied toward 75 before pulling back to the initial breakout area, leaving market participants asking whether this will be a successful retest or if prices will confirm a failed breakout by breaking back into their former range.

Weekly chart showing the performance of USD/INR
Optuma

One area we're looking for clues is in the daily chart, where prices are currently sitting just above a rising 200-day moving average. What's most interesting though is that prices recently undercut their November lows and quickly reversed as momentum diverged positively.

Daily chart showing the performance of USD/INR
Optuma

We love this type of setup because typically failed moves lead to fast moves in the opposite direction, particularly when combined with other factors like momentum divergences. This may be just the catalyst needed for buyers to retake control of this market.

As long as prices are above 68.80, the intermediate-term reward/risk is still skewed in favor of the bulls, but if prices break back below their November lows, that's likely a signal that sellers remain in control and that further weakness is ahead.

We have our risk management levels and upside targets – now we wait and see if the market confirms our thesis. Past trades with this setup tell me that we should expect an answer shortly.

Thanks for reading, and let us know if you have any questions.

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