Daily Rupee call: Buy with a tight stop-loss

Akhil Nallamuthu, BL Research Bureau | Updated on February 03, 2020

The rupee (INR) closed flat against the dollar (USD) last week on close-to-close basis. The local currency closed at 71.35 versus its previous week’s close of 71.33. But the one-year forward spread of USDINR currency pair went up marginally. Further increase in the spread on the back of dollar demand can weigh on rupee.

In the daily chart, the rupee appears to be consolidating between 71.2 and 71.6 and only if the Indian currency moves out of this range, the next leg of trend can be confirmed. Above 71.2, the resistance is at 71 whereas below 71.6, the immediate support can be spotted at 71.85.

Foreign reserves:

The foreign reserves in Reserve Bank of India’s (RBI) kitty continues to increase as it hits all-time high. The weekly statistical supplement released by the central bank last Friday showed that the total foreign reserves has gone up by around $4.5 billion over the previous week. The total reserves increased to $466.69 billion from $462.15 billion. Foreign Currency Assets (FCA), the largest component of the reserves went up by $4.4 billion to $432.91 billion from $428.45 in the same period. The value of gold holdings was largely unchanged at $28.71 billion compared to previous week’s $28.56 billion. 

Dollar index:

The dollar index declined last week after facing a resistance at 98. The fall has also resulted in the index slipping below the support at 98.45, where 38.2 per cent Fibonacci retracement level of the previous uptrend coincides. On the downside, the price area between 97 and 97.15 can act as a support band, arresting the decline. On the other hand, if the index goes up, 98 will be a considerable hurdle.

Trade strategy:

The rupee opened with a bearish bias but is currently trading near the support level of 71.6. Until the rupee holds above that level, chance of further weakening is low. Hence, one can approach rupee with positive bias for intraday and so traders are advised to buy the local currency. Place a tight stop-loss as a break below 71.6 can put significant downward pressure on rupee.

Supports: 71.6 and 71.85

Resistances: 71.4 and 71.2

Published on February 03, 2020

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