The Hindu Business Line : Rupee decline to continue

Rupee declined to a low of 47.6 against the dollar on October 29 as continuing weakness in equity market and outflow of foreign institutional funds dragged the currency lower. Month-end demand for dollars from importers was another factor applying downward pressure on the Indian currency.

Dollar found it difficult to make further headway against other currencies last week. But the greenback has begun moving higher against other currencies ahead of the Federal Open Market Committee meeting in which the US Central Bank is expected to leave rates unchanged. The dollar index spiked higher to 76.7 on Tuesday. Next resistance for this index is at the previous peak of 77.7.

One-month view

The movement of currency over the past week suggests that the rally that began from 49.2 has ended. This could also be the end a 3-wave up-move from the March low of 52. If the decline from the peak of 45.8 is the correction of the entire move from 52.2 to 45.8, then the Fibonacci retracement targets are 48.2, 49 and 49.7.

The currency has strong support in the zone between 48 and 48.5. If the current decline halts here, a sideways move between 45.5 and 48.5 can ensue over the medium-term.

Five-day view

The short-term down-trend that began from October 15 resumed on Tuesday taking the rupee down to 47.4. This down-move can prolong to take the currency lower to 47.9, 48.6 or 48.8.

Key resistance for the week ahead is at 46.9. The short-term down-trend will last as long as the currency trades below this level.

Supports – 47.9, 48.6 48.8

Resistances – 46.9, 46.5, 45.8

Lokeshwarri S.K.

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