The Hindu Business Line : Rupee to test 50-mark

Indian rupee resumed its southward journey against the dollar after a protracted sideways movement spanning almost two months. Concerns regarding increased Government borrowing target and widening current account deficit caused this bout of weakness. Plunging stock markets only exacerbated the currency’s decline.

Strength in dollar also impacted the Indian currency adversely. Dollar recorded a 10-week high against the Euro as Moody’s Investor Service downgraded a number of banks with branches in Eastern Europe. The dollar index that tracks the greenback’s movement against six major currencies moved above the key resistance at 87 on Tuesday. It is now headed towards the previous peak at 88.4.

Five-day view

It was heartening to see the rupee shake of its lethargy and make a definitive move on Tuesday. The currency recorded a sharp 1.6 per cent decline that made it close below the support at 49.3. It is now fairly certain that the currency is charting the third leg of the down-move that began on December 19. The targets for this move are 50.05 and then 50.9. The previous trough at 50.5 will also act as a strong support in the near term.

The trend-line at 48.6 will be the key resistance for the short-term. The view for this period will stay negative as long as the currency trades below this level.

One-month view

We retain a neutral medium term view for the rupee. The range for this term stays between 46.5 and 50.5. Tuesday’s move is likely to take the currency to the lower boundary of this range that is 50.5.

There are two trajectories that the Indian currency can move in once it re-tests the previous trough at 50.5. It can decline below 50.5 signalling the resumption of the down-trend that commenced in January 2008. Minimum target as per this count is 53.

A rebound from this level again will take the currency again towards 47.5 or 46.5.

The movement over the next week should help to make the future direction of the rupee clearer.

Supports – 50.05, 50.5, 50.9

Resistances – 49, 48.9, 48.6

Lokeshwarri S. K.

More Stories on : Forex | Technical Analysis

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