Though the rupee remained within the 70.75 and 71 range on Friday, there was a sharp recovery, after hitting support at 71. Following an intraday low of 70.98, the domestic currency gained throughout the day and closed the session at 70.81.

Appreciation from current levels will face a resistance at 70.75, which has been restricting the rupee over the past four weeks. A break above that level, will take it to 70.5 intra-day. However, if the Indian currency faces downward pressure due to the back of resistance, it might retract to 71. Noticeably, 70.89 is a reasonable support.

Foreign exchange data released by the RBI last Friday showed that reserves are up by $1.8 billion to $442.5 billion compared to the previous week’s $440.7 billion. Most of the gain is contributed by foreign currency assets that increased by $1.6 billion to $410.4 billion against the previous week’s $408.8 billion. Increasing reserves is a good tool for the RBI to work against potential volatility, instilling stability in rupee.

The dollar index is trading near the crucial support at 97 and the crude oil price recovered sharply on Friday. A rise in dollar and further recovery in the crude oil price will weigh on the rupee. Taking these factors into account, along with rupee trading near resistance, the domestic currency might face some pressure today. Hence, one can be cautiously bearish and sell the rupee on rallies, with stop-loss at 70.7. Stick to the stop-loss strictly as a break of resistance at 70.75 will most likely result in a strong rupee rally.

Supports: 70.89 and 71

Resistances: 70.75 and 70.5

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