GBP/INR Price Forecast Q4 2020: Retrace Underway on Bullish Trend
Skerdian Meta • 4 min read
The GBP is a volatile currency, which means that most pairs that include the GBP are also quite volatile. On the other hand, the Indian Rupee is quite a volatile currency in itself, which makes the GBP/INR extremely volatile. The 2000s were already volatile, with this pair being bullish until the end of 2006, then turning bullish until 2010. But the following decade became even more volatile, as the price had surged from below 65 up to 107 by August 2013. That was an extraordinary surge, based on fundamentals in India, but the price started reversing back down from 2015. The bullish trend resumed again for the GBP/INR and buyers remained in charge on the monthly chart, but a pullback, which started in September, seems to be on the way, so let’s see what’s on the table for this pair.
Current GBP/INR Price: $
Recent Changes in the GBP/INR Price
|Period||Change ($)||Change %|
The fundamentals for both currencies have helped increase the volatility in the GBP/INR. India is a net exporter, despite being a developing economy, which attracts both a lot of foreign investment and plenty of remittances. This has been keeping the Indian Rupee under pressure, especially during 2013, when we saw a huge decline in the INR and a surge in all INR pairs. The GBP also lives in a world of its own, with Brexit increasing the uncertainty and the volatility even further. Right now, the odds are that the UK will leave the EU without a trade deal, but that might not turn out to be such a bad thing in the end.
|GBP/INR Forecast: Q4 2020||GBP/INR Forecast: 1 Year||GBP/INR Forecast: 3 Years|
|Price: $85 – $87|
Price drivers: Covid sentiment, EU-UK trade talks, Technicals
Price drivers: Post Brexit, Post Covid Situation, Global politics, Risk sentiment
Price drivers: Trade fundamentals, Technicals, BOE, RBI
GBP/INR Price Prediction for the Next Five Years
COVID-19 and Market Sentiment
While the GBP is not as much of a risk currency as the commodity dollars, it likes to rally when the risk sentiment is positive and retreat when the sentiment is negative in financial markets. But, with India being an emerging market, the Indian Rupee is also a risk currency. So, this eliminates the risk factor for this pair, which means that fundamentals have been mostly in charge for the GBP/INR. However, the GBP has benefited more from the COVID-19 sentiment since March, with GBP/USD running around 20 cents higher from the bottom on March 19, while the USD/INR declined from 77.50s to 72.50s, which means that the INR only gained around 5 cents against the USD, which is just a quarter, compared to the GBP. As a result, the GBP/INR surged more than 13 cents from the dip in March, although, it seems like the COVID-19 trade is over now and other fundamentals such as Brexit are taking over.
Speaking of other fundamentals, Brexit has come back to the spotlight, after being overshadowed by the coronavirus, which has been negative for the GBP. Last year, there was some positive progress with this issue, as Boris Johnson proposed a Brexit deal with the EU, after finding middle ground for the Irish border problem. But, Brexit has come back into the spotlight now, as the mayhem from the coronavirus is calming down, and from what we have heard, the situation seems negative for the GBP. Comments from both sides show that tensions have been increasing, as the UK edges towards a no-trade-deal scenario. They are far from a trade agreement and the GBP charts reflect this. The GBP/USD had lost 8 cents by the last week of September and the GBP/INR has reversed down, losing 5 cents. As it stands now, the UK will head out of the EU with no trade deal, and the GBP/INR should continue to decline, unless there is progress pretty fast. From the tone of the UK government, it seems like PM Johnson is working towards not getting a trade deal form the EU. If that’s the case, the GBP/INR is expected to continue pulling back lower, probably to the trend line, but we will take a deeper look at the technical analysis in the section below.
Technical Analysis – Will Moving Averages Keep Pushing the GBP/INR Up?
MAs have been supporting the GBP/INR since 2000
As can be seen from the monthly chart, the GBP/INR has been on a bullish trend since the 1990s. The chart shows the price at below 48 back in the ‘90s, and now it is trading at twice that level, having increased to 107 in 2013, as India’s trade deficit surged back then. So, no one can deny the bullish bias in this pair. Lows keep getting higher, which means that sellers are getting weaker and buyers are jumping in faster on pullbacks. Moving averages have also done a good job in providing support on retraces lower. During the 2000s, the 50 SMA (yellow) has been doing a good job in keeping the uptrend going, but the financial crisis of 2008 turned the GBP pretty bearish and the GBP/INR broke the 50 SMA and the 100 SMA (green). However, the decline stopped in 2010 and the bullish trend resumed again. The 200 SMA (purple) has turned into the ultimate support since 2009, despite being pierced, and it reversed the price higher in March this year, for the last time. Besides that, a trend-line has formed since 2009. Traders are respecting these technical indicators, which are good places to go long on the GBP/INR. If the UK ends up with no trade deal, chances are that the price will fall to the 200 SMA and the trend-line, which both come in at 85.50. In that case, we will try to go long if the price forms a bullish reversing signal, such as the doji candlestick in August, which is a bearish reversing signal. So, we will wait for the pullback lower to materialize in full for the GBP/INR, and then look to buy this pair.