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The relentless rally in crude prices, that is nudging $130, continued exerting pressure on the rupee. The Indian currency recorded a trough at Rs 42.92 last Friday. However, exporters selling at lower levels aided in retracting the currency from the recent trough. Inflation at a 44-month high only dampened the sentiment further.

The listless performance of the stock markets and tepid inflows from foreign institutional investors (FIIs) are not doing much to support the rupee’s decline either. The dollar too is reeling at a one-month low against a basket of currencies on higher-than-expected inflation and soaring crude prices.

The rupee drew very close to the Rs 43 mark that we had indicated as a significant medium as well as long-term support in this column last week. If the entire up-move in the dollar-rupee pair from the January trough at Rs 39.02 is considered as a pull-back rally, then this move can halt and reverse around Rs 43 that is 38.2 per cent retracement (Fibonacci number) of the long-term decline from the May 2002 peak.

A significant trough was also formed at Rs 43 in July 2005 from where the dollar-rupee pair rose to the peak at Rs 47.04, a year later. This trough will act as a resistance to the current up-move.

However, it cannot be concluded that the currency pair would reverse from the Rs 43 level. There are no signs of weakness evident in the charts yet. A firm move beyond Rs 43 would peg the next target at Rs 44.3.

The dollar-rupee pair recovered from Rs 42.24 and is currently drawing close to the previous peak at Rs 42.92. The currency pair can move in the range between Rs 42 and Rs 43 for a few more sessions. As long as the currency pair holds above Rs 42, there would be the possibility of a move higher to Rs 43.23 or Rs 43.52. A decline below Rs 42 would imply that the near term trend has turned negative and that the currency pair could move towards Rs 41.6 or Rs 41.2.

Supports – 42.2, 41.9, 41.3

Resistances – 42.9, 43.2, 43.5

Lokeshwarri S.K.

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