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The resistance at 47 proved too strong for the rupee to surpass and it moved sideways between 47 and 48 for a few sessions.

But resumption of the downtrend in equity markets, coupled with data suggesting that Indian exports have shrunk 15 per cent in October, pulled the Indian currency lower towards the 48 mark again.

One reason why the rupee failed to make headway was the tepid net cash inflows from the foreign institutional investors (FIIs) over the past week.

The massive stimulus package of close to $586 billion announced by China resulted in the dollar weakening against most major currencies on Monday. But the intermediate trend in the dollar stays positive. The rupee traded weak on the non-deliverable forwards (NDF) market. The one-month forward in the NDF market was trading at 48.5 and three-month forward at 49.3.

The sideways move witnessed over the past week has not altered our medium-term view.

The reversal from the recent peak at 46.7 is in line with our expectation that a range-bound move between 46.4 and 50.5 can ensue for a few more weeks.

As explained earlier, the rupee is reversing higher from a very important support zone between 49 and 50.5. The medium-term movement can be in either of the two trajectories:

a) If the rupee appreciation halts below 46.4, it would keep open the possibility of a decline to 53.

b) Appreciation beyond 46.4 would imply that the third leg of the move that began from 49.07 in May 2002 is unfolding from the recent trough at 50.28. According to this count, the rupee appreciation can continue to take the currency higher to 44 or even beyond.

We will wait for a strong move beyond either boundary of the afore-mentioned range to show us the way forward.

Rupee is in a short-term down trend from the recent peak at 46.7.

The short-term targets for this move are 48.5 and 48.9. A rebound from either of these levels will make the currency rise towards 47 again. Move beyond 48.9 will cause a steep decline to 50.27.

The zone between 46.4 and 47 will stay as key short-term resistance zone. Appreciation beyond this zone will give the next target at 45.9.

Supports – 48.5, 48.9, 50.2

Resistances – 47.2, 46.7, 46.4

Lokeshwarri S. K.

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