Daily Rupee call: Short INR if it slips below 73.4

Akhil Nallamuthu BL Research Bureau | Updated on October 13, 2020 Published on October 13, 2020

The rupee (INR) settled 14 paise lower at 73.27 against the dollar (USD) on Monday. Following this, the local currency today opened with a gap-down at 73.39. Thus, INR has slipped below the support of 73.3. Further depreciation can drag the rupee to 73.5. Subsequent support is at 73.7. But if INR recovers and rallies above 73.3, it can advance to 73.15. A break of this level can take INR to 73.

As the market was trading with a positive bias yesterday, the Foreign Portfolio Investors (FPI) remained buyers. The net inflow stood at ₹615 crore (equity and debt combined). Despite this the domestic unit weakened yesterday. But if FPIs continues to pump in more money, it can help the rupee to strengthen against the greenback.

Inflation rises

The Consumer Price Index (CPI) inflation for September was recorded at 7.34 per cent, well above August’s 6.69 per cent, according to the data by the Ministry of Statistics and Program Implementation (MoSPI). Food items remained the main driver.

The Consumer Food Price Index (CFPI) stood at 10.68 per cent in September as against 9.05 per cent a month before. Higher inflation is not good for the currency and it has been hovering above the Monetary Policy Committee’s targeted level.

Dollar index

The dollar index ended the day with a marginal loss, at 93.04. Today, it has inched up and is trading near 93.15. However, it remains below the 50-day moving average and the price action hints at a decline from the current level. A breach of 93 can bring in more sellers, possible dragging the index lower to 92.8 and 92.5. A fall in dollar index can be positive for the Indian currency.

Trade strategy

The rupee, opening lower, is now below the support of 73.3 and the inflation data is likely to weigh on the local currency. But 73.4 has been acting as a support for the past couple of trading sessions. Hence, consider fresh short positions in rupee with tight stop-loss if only INR slips below 73.4.

Supports: 73.4 and 73.5

Resistances: 73.3 and 73.15

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Published on October 13, 2020
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