Go long in rupee with stop-loss at 72.1

The rupee (INR) declined last week against closing at 71.66 versus previous week’s close of 71.37 against the dollar (USD). This is the lowest weekly close since the first week of January 2020. Year-to-date, the local currency has lost 0.63 per cent against the dollar.

On the downside, the immediate support can be spotted at 71.88. Below that level, the important level of 72 can act as a significant support. On the other hand, if rupee strengthens above 71.65, 71.5 can be a hurdle. Resistance above that level is at 71.4

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday showed that the foreign reserves have increased over the previous week. As per the report, the reserves have increased by $3.1 billion i.e. the total reserves increased to $476.1 billion from $473 billion. Foreign Currency Assets (FCA), the largest component of the reserves went up by around $2.7 billion to $441.9 billion from $439.2 in the same period. The value of gold holdings marginally increased to $29.1 billion compared to previous week’s $28.8 billion.

Dollar index

The dollar index gained throughout the week and registered a fresh one-year high of 99.91 on Thursday, nearing the important level of 100. But on Friday, the index faced a considerable selling pressure and ended the week with a marginal gain at 99.26. On further decline, the index will find support at 99 and 98.7. But if the index resumes the uptrend, 100 will act as a substantial resistance. Above that level, 101.2 can act as a minor resistance.

Trade strategy

Today, the rupee has opened lower at 71.89 versus its previous close of 71.66. Though the trend is bearish, the local currency has a substantial support band between 71.88 and 72. Hence, for intraday, traders can go long in rupee on declines with stop-loss at 72.1

Supports: 71.88 and 72

Resistances: 71.65 and 71.5