After posting a gain of one-fifth of a per cent on Monday, the rupee (INR) has opened with a gap-up on Tuesday today against the dollar (USD). That is, INR closed at 72.50 and has today opened at 72.36. Notably, 72.35 is a resistance level and this blocked the bulls yesterday. Because of this resistance, if the rupee weakens today, it can find support at 72.50. Subsequent support is at 72.70. However, if the local currency decisively breaches 72.35 and moves up, 72.15 can act as a minor hurdle. Above this level, 72.00 is a considerable resistance.

As the market sentiment was negative yesterday, the foreign portfolio investors (FPI) pulled out money for the domestic market. That is, the net outflow on Monday stood at ₹893 crore. This dragged the rupee in the second half of yesterday’s session. If the sell-off continues, the local currency might see a correction.

Dollar index

Since the dollar weakened, the dollar index declined yesterday and slipped below the support of 90.35, where the 50-day moving average coincides. It closed yesterday’s session at 90.01 versus previous session’s close of 90.36. Though the current price level of 90.00 is a support, the index is likely to breach this level and extend the downswing. This means a weak dollar and dollar depreciation can be positive for the rupee.

Trade strategy

The rupee is currently hovering at a resistance level of 72.35. But it has opened on the strong foot and the dollar index hinting at a decline in the greenback. Considering these factors, one can be bullish on rupee. But since 72.35 is a hurdle, traders can go long above 72.35; place a tight stop-loss.

Supports: 72.50 and 73.70

Resistances: 72.15 and 72.00

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