Daily Rupee call: INR above key barrier of 73

Akhil Nallamuthu BL Research Bureau January 4 | Updated on January 04, 2021

Traders can wait for a decline to initiate fresh rupee intra-day long positions

The Indian rupee (INR) closed last week with gains of about 0.6 per cent against the US dollar (USD). That is, it closed at 73.12 versus the preceding week’s close of 73.54. The domestic currency has been appreciating over the past couple of weeks and even today, it has opened with a considerable gap-up at 72.92.

Since the INR has now rallied past the key barrier of 73, it now faces the test of sustainability over this level. Should it stay above 73, it can be expected to appreciate to 72.75 and then possibly to 72.50 during the course of this week. But if it slips back below 73, the nearest support levels can be found at 73.15 and 73.40.

Also read: FPIs shied away from G-Secs in 2020 on weak economic outlook and falling interest rates

As a pillar of strength, foreign inflows have been very favourable to the Indian currency. According to National Securities Depository Limited (NSDL) data, 2020 ended with net foreign portfolio investor (FPI) inflows of over ₹1-lakh crore. Year 2021 too, has begun on a positive note. Last Friday, i.e. the first day of this year’s trading session, net FPI inflows stood at ₹750 crore (equity and debt combined). So long as this positive trend continues, it can keep the rupee at higher levels.

The latest Reserve Bank of India (RBI) data shows that the total foreign reserves stood at $580.8 billion as on December 25. This was largely unchanged compared to the preceding week. The huge reserves are a big plus for the local currency.

Dollar index

The dollar index closed at 89.94 last Friday versus its preceding week’s close of 90.32, thereby losing 0.4 per cent. Apparently, the overall trend is bearish and the decline looks steady. Currently trading at 89.74, the immediate support can be found at 89.50. This is a key level for the short term.

While the index might bounce off this level, there are considerable resistance levels at 90.35 and 90.65. Nevertheless, until it trades below these levels, the likelihood of bears dragging the index below 89.50 will be high and this can be positive for the rupee.

Trade strategy

Retaining the bullish bias, the rupee opened today (Monday) on a high. Since it has moved above the key barrier at 73, it is likely to end the session on a positive note. But from the trading perspective, the gap-up looks a bit overstretched. Hence, rather than going long at current levels, traders can wait for a decline to initiate fresh rupee intraday long positions. Maintain tight stop-loss.

Supports: 73.00 and 73.15

Resistances: 72.75 and 72.50

Published on January 04, 2021

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