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The rupee (INR) closed at 71.73 on Friday, after testing support at 71.88. It had closed Thursday’s session at 71.6 against the dollar (USD). The Indian currency has slipped below the key level of 71.6. But it has a support band between 71.88 and 72, which could arrest further deprecation. On the upside, 71.6 will act as a hurdle and, hence, the rupee could be held between 71.6 and 71.88 for a while.
On Friday, the Ministry of Statistics and Programme Implementation (MOSPI) released Gross Domestic Product (GDP) data, which showed the economy grew by 4.5 per cent in the July-September quarter, its slowest pace in six years.
Core sector output data for October, released on Friday, showed a contraction by 5.8 per cent compared to an expansion of 4.8 per cent in the corresponding month of the previous year. Also, the fiscal deficit for the year is ₹7.2 lakh crore as of October, which is about 102 per cent of the Budget Estimate (BE) of ₹7.03 lakh crore for the current fiscal.
Also, on Friday, the Reserve Bank of India released the weekly statistical supplement containing the foreign reserves data. Total reserves stand at $448.6 billion (new all-time high), compared to the previous week’s $448.2 billion, an increase by $0.4 billion.
While weak GDP and core sector data may influence the market negatively, acting as a dampener for the rupee, record foreign exchange reservea gives the RBI more room to manage any unexpected volatility in the USDINR exchange rate.
The dollar continues to consolidate and, as a result, the dollar index continues to trade around 98.25. On the upside, 98.5 will act as a resistance and on the downside, 98 is a good support.
Trade strategy
The rupee opened Monday’s session marginally lower at 71.78 and is currently trading at 71.73. Since it is trading at the middle of two key levels between 71.6 and 71.88, traders are advised to wait for the USDINR exchange rate to reach either of these levels.
If the exchange rate reaches 71.88, initiate a rupee long with tight a stop-loss; whereas, if it touches 71.6, initiate a rupee short with a tight stop-loss.
Supports: 71.88 and 72
Resistances: 71.6 and 71.4
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