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The monetary measures and stimulus package announced over the weekend had minimal impact on the rupee. Though the currency strengthened to 49.2 when foreign exchange markets opened on Monday morning, the rally could not sustain, implying that the currency continues to be under pressure.

Barack Obama’s stimulus package for the US, aimed at creating 2.5 million new jobs and cited to be the largest infrastructure investment in the last 50 years, was greeted with a strong rally in equity and commodity markets. This, however, reduced the allure of dollar as a safe-haven currency and caused a 2 per cent decline in the dollar index on Monday. The intermediate-term view on dollar will however stay positive as long as this index holds above 84.

There was slight appreciation in rupee over the last few trading sessions. But the rally was very tentative and appears to be part of a short-term consolidation before the decline continues.

There would be strong resistance at the 50-day moving average positioned at 48.7 and above that, at 48.2. Downward reversal below these levels would pull the currency towards 50.5 and then 51.4 over the short term.

The lack of momentum in the rupee rally from the December 2 trough implies that down-move from 46.7 is likely to unfold its third leg downward that takes the currency lower towards 51.4 or 53 over the medium term. If we extrapolate the move from the January trough at 39.02, it gives us the subsequent medium term targets at 51 and then 53.

The immediate resistance that needs to be watched is at 48. Appreciation beyond this level can take rupee to 46.4. The medium-term view will turn positive only on a close beyond this level.

Supports – 50.5, 50.9, 51.4

Resistances – 49.1, 48.6, 48.2

Lokeshwarri S. K.

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