The Hindu Business Line : Rupee likely to strengthen further

The Rupee moved in the narrow band between 42.1 and 42.6 in the sessions following the Monetary Policy review. The comatose equity markets and fairly stable crude prices contributed to this somnolent state in the currency. FIIs continued to be net sellers in stock markets, but the deluge of inflows through the debt route in July more than made up for the outflow through equities.

Foreign exchange markets have much to react to this week as the US Federal Reserve, European Central Bank and the Bank of England meet to mull policy action. All three central banks are expected to hold the current rates. The US dollar index on FINEX is in a short-term uptrend since July 15. This uptrend is likely to extend a little further up to the 200-day moving average at 74.

1-month view

Our medium term view remains unaltered. The rupee is likely to stay in a range within between 41.6 and 44. But the technical signals are now veering towards the currency appreciating a little further in the medium term. The crossover of the 50 and 200 day moving average and the sharp decline in the 10-week rate of change oscillator corroborate this view.

The rupee can rise towards 41.7, 41.3 or 40.7 over the medium term. However, the medium term view will turn overtly positive only on appreciation above 40.7.

5-day view

Crude prices declining below $120 is a positive from the near-term perspective. The Indian currency could continue in the current band between 42.1 and 42.6 for a few more sessions. The immediate resistance is at 42.1. If this level is penetrated, the next stop for the rupee would be at the July 24 peak at 41.7.

The supports in the upcoming sessions would be at 42.5, 42.8 and then 43.2. The presence of both the long-term moving averages in the zone between 42.5 and 42.8 makes it a formidable short-term support, which might not be breached just yet.

Supports – 42.5, 42.8, 43.2

Resistances – 41.7, 41.3, 41.2

Lokeshwarri S. K.

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