The Hindu Business Line : Searing momentum in rupee

All eyes were riveted on the rupee as the currency slid below the Rs 43-mark last Friday. But the decline was arrested thanks to a bout of profit-booking in crude prices that dragged the commodity lower from the peak at $135.

The relief however appears temporary as crude prices have begun hardening again and demand from oil importers to meet their month-end commitments is pushing the rupee towards the Rs 43-level once more. The dollar is still languishing close to one-month lows against a basket of currencies. The decline in stock markets that induced the FIIs to sell nearly $700 million of stocks in May only added to the downward pressure on the Indian currency.

1-month view

The dollar rupee pair reversed from the peak at Rs 43.2 last Friday. Though exporters are coming in to sell dollars close to the Rs 43-mark thus lending support, this level is not impenetrable. The target beyond is at Rs 44.3. A sideways move with an upward bias is quite likely over the next few weeks. The boundaries could be at Rs 42 and Rs 44.

This move would complete the rally from the Rs 39.6 trough that has resulted in over 8 per cent depreciation in less than one month. Weekly oscillators are overstretched. The 10-week rate of change oscillator is at levels not witnessed in the last seven years implying that the currency pair is accelerating at an unsustainable speed. However, a close below Rs 42 is needed to signal that the currency pair is on the downward trajectory.

5-day view

The USD-INR pair has been consolidating at higher levels since May 16, as anticipated in our previous column. The formation thus far resembles an irregular flat but there can be an x wave followed by another three wave pattern. Such a move will keep the currency pair between Rs 42 and Rs 43.5 over the next few sessions.

Immediate resistance for the currency pair is at Rs 42.92. Once this level is crossed, the pair can move on to the previous peak at Rs 43.2 and then to Rs 43.66. The band between Rs 43.5 and Rs 43.7 would be the key resistance in the week ahead. Failure to surpass Rs 43 would signal an impending move lower to Rs 42.

Supports – 42.4, 42.3, 42

Resistances – 43, 43.2, 43.66

Lokeshwarri S.K.

More Stories on : Forex | Technical Analysis

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page