CAD/INR Price Forecast Q4 2020: Is the Uptrend Resuming Again?
Skerdian Meta • 4 min read
As risk currencies, both the CAD and the INR behave similarly when the sentiment in the markets is positive or negative. However, India is a developing BRIC country with high inflation, whereas Canada is a developed nation, which is beneficial for the CAD. So, when the sentiment is positive, the CAD rallies harder than the INR, while when the sentiment is negative the CAD declines less than the INR. This has kept the CAD/INR on a long-term bullish trend. The current price is double the value it was in 2000, having increased from around 28 to 56, where it is trading now.
During this time, moving averages have been doing a great job in supporting this pair on the monthly chart and pushing the trend higher. In 2013, the pair surged above 65, as the INR crashed, due to a number of domestic and external factors that turned toxic for the Rupee. But, the price retreated down again as the situation improved. The moving averages stopped the decline and continue to push this pair higher, and now, the CAD/INR faces a resistance level at 57-58, which will decide whether the long-term bullish trend will officially be on once again.
Current CAD/INR Price: $
Recent Changes in CAD/INR Price
|Period||Change ($)||Change %|
Factors Affecting the CAD/INR
Crude Oil is a major export for Canada, which means that the fluctuations in crude oil prices affect the Canadian Dollar. When oil prices increase, the CAD goes up too. The coronavirus lockdowns had an impact all over the globe, while the second wave is only affecting the West, which will weigh on the respective currencies, including the CAD. The economic performance is important for both currencies, although the economy all over the world has been hit by the pandemic this year. Foreign direct investment in India plays a major role in the economic expansion of the country, although they are prone to the risk sentiment as well, declining in difficult times, such as the one we are going through now.
|CAD/INR Forecast: Q4 2020||CAD/INR Forecast: 1 Year||CAD/INR Forecast: 3 Years|
|Price: $ 84 – $ 100|
Price drivers: Covid-19, Risk Sentiment, RBI Rates, Bank of Canada
|Price: $ 145.235 |
Price drivers: Covid-19 Market Sentiment, Economic Recovery, Developing Markets, USD Correlation
|Price: $ 221|
Price drivers: Inflation, Developing Markets, RBI Actions, Investor sentiment
CAD/INR Price Prediction for the Next 5 Years
Indian Rupee Fundamentals
India is one of the BRICK countries, so it attracts lots of foreign investments as a developing nation. This means that it receives large amounts of foreign currencies, although it is also vulnerable when such liquidity dries up, like it did in 2013. Foreign direct investment was accounting for around 50 billion/year in India, but inflows registered a decline of 38%, to $ 22.42 billion, in 2012–2013. Inflation also increased, rising from 2.5%-3% to 4.8%.
The combination of these factors, as well as the dovish Reserve Bank of India (RBI) sent the Rupee crashing lower. This year, the situation looks even worse, as foreign investments have declined, due to the coronavirus and the global meltdown, while inflation increased to 7.6% at some point, as the lockdowns disrupted supply chains globally, especially from China, since India is a major importer of Chinese goods. This is keeping the Indian Rupee bearish, and this currency pair bullish.
Canadian Dollar Fundamentals
As a risk currency, the Canadian Dollar took a hit during the first months of the COVID-19 pandemic in February and March. The crash in crude oil in April, which saw US WTI close to $ -40, weighed further on the CAD, but oil prices have reversed since then, and the pair has been bullish ever since, which has benefited the CAD. However, the economic data weakened in Canada during the fall, and in winter we will probably see another recession, as the economy goes into another lockdown. The CAD will feel the weight, and if oil declines again, due to the new lockdowns, it will pull the CAD lower as well. But, the situation seems slightly better than in India, so the bullish trend should continue for the EUR/CAD.
Technical Analysis – The Uptrend Has Slowed, Compared to Pre-2013
The trend in the CAD/INR has been bullish as far back as the chart shows. The trend was quite strong until 2013, when we saw a surge for the reasons mentioned above, but then we saw a retrace back down until May 2017, when the decline ended. It seems like the bullish trend has resumed again, but it won’t be official until the resistance at 57.50 is broken.
The 100 SMA is pushing USD/CAD higher
When the trend was strong, the smaller moving averages, like the 20 SMA (gray) and the 50 SMA (yellow) in particular, were providing solid support for this pair, pushing it higher. But after the pullback, which followed the 2013 surge, the 100 SMA (green) turned into support on the monthly chart, despite being pierced briefly in 2017, and it’s this moving average that is pushing the CAD/INR higher on this time-frame chart now.
EUR/CAD is breaking above the resistance this time
On the weekly chart, we see that the 100 SMA was providing support during the climb, until 2013, then when the price retraced lower, the 50 SMA (yellow) turned into resistance, although the area around 46.50 turned into support for the CAD/INR. The price has been climbing higher since 2017, but the pace is not as strong as pre-2013. On this chart we see that the price is approaching the resistance zone at 57.50, so we will see whether buyers will break above it, or whether the price will pull back down.