Daily Rupee call: Risk-reward favour INR long

Akhil Nallamuthu BL Research Bureau | Updated on March 05, 2021

Even though the rupee (INR) began with a gap-down yesterday, and also opening below the support of 73.00, it did not fall further. By the end of the day, it had recouped some of its losses and ended the day at 72.83 versus preceding day’s close of 72.72 against the dollar (USD).

Today, the domestic currency began the day on the weak foot as it has opened lower at 72.97. Nevertheless, 73.00 can act as a strong base and can prevent a fall below this level. If the local currency recovers on the back of this support, it can appreciate towards 72.80, which can be a hurdle for the bulls. Above that level, 72.70 is the resistance level. On the other hand, if the rupee breaks below the support at 73.00, it can quickly fall towards 73.15. Subsequently, it could decline to 73.30.

The domestic equity market remained volatile yesterday and ended the day with a loss. In line with this, the foreign portfolio investors (FPI) too were bearish yesterday. Though the amount was not significant, the net outflows on Thursday stood at ₹223 crore. However, for the week, the fund is still positive where FPIs had net invested ₹4,213 crore. But if the sell-off continues, the rupee can come under pressure.

Dollar index

The dollar index broke out of the critical resistance of 91.00 yesterday and closed at 91.63 versus Wednesday’s close of 90.95, thereby gaining three-fourth of a per cent. The near-term outlook has clearly turned bullish for the dollar index and the rally is likely to be extended in the coming days. It is likely to test the immediate resistance at 92.20, above which it can touch 92.60. This can act as a drag on the rupee.

Trade strategy

Even though the dollar index is signaling a strong dollar and the rupee has opened the session with a gap-down, the support at 73.00 still stays valid. As long as it stays so, the bias will be bullish for the rupee. Whatsoever, rupee bulls should be cautious and closely watch how the dollar index moves from here. Yet, considering the risk-reward perspective, one can go long in the rupee for intraday with a tight stop-loss.

Supports: 73.00 and 73.15

Resistances: 72.80 and 72.70

Published on March 05, 2021

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