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The rupee (INR) opened the day with a marginal gain against the dollar (USD). It began the session at 75.45 versus Thursday’s close of 75.56. The Indian currency has considerable support at 75.6 and while it remains above that level, the chances of a further decline are low. Further, 75.4 has been acting as a resistance, blocking a rally.
If the local currency advances and breaks the barrier at 75.4, it will face resistance at 75.15. Subsequent resistance is at 75. On the other hand, a break below 75.6 might invite good selling interest, dragging the rupee towards 76.
Despite considerable selling by Foreign Portfolio Investors (FPI), the rupee managed to stay flat yesterday. The net outflow of the FPI was at about ₹2,152 crore (equity and debt combined). However, if FPIs continue to sell, the rupee will most likely take a hit.
WPI Inflation
Yesterday, the government released a truncated Wholesale Price Index (WPI) index due to a paucity of data. The release shows that the WPI food index eased to 3.6 per cent in April, in comparison to 5.49 per cent recorded in March. A deflation of 0.79 per cent was witnessed in primary articles in April, as against inflation of 3.72 per cent in March. Whereas, a deflation of 10.12 per cent was seen in the fuel and power category, as against a deflation of 1.76 per cent in March. The data is less likely to have an impact on the rupee, as it does not give the complete picture.
Dollar index
In the past couple of trading sessions, the dollar index has been trading above 100. However, 100.5 has acted as a cap, blocking the rally beyond it. A breakout of that level might take the index higher. Nevertheless, the index seems to be moving within the range of 98.8 and 100.9, and so it should break out of the range in order to establish a rally.
Trade strategy
The rupee cannot be expected to witness a trend until it takes out either 75.4 or 75.6. The direction of the break will provide hints to the direction of the next price swing. Until then, traders can remain on the sidelines.
Supports: 75.6 and 75.8
Resistances: 75.4 and 75.15
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