The rupee is trading around a critical support of 71 against the dollar. In yesterday’s session, it closed with a considerable loss of 0.4 per cent at 70.98 against the previous close of 70.68.

Though it traded below 71 briefly, the rupee managed to close above it on Wednesday. The 38.2 per cent Fibonacci retracement level of the previous rupee uptrend lies at 71, making the support significant. So, if the Indian currency gains from here, it will face a minor resistance at 70.89, before moving towards 70.75. But if weakness persists resulting in a decisive break below 71, the rupee might face increased selling pressure, leading to a decline to 71.2. Support below that level is at 71.4.

The dollar seems to be maintaining its bullish bias and, as a result, the dollar index continues to trade above 97.67. Price action suggests further appreciation in the index towards 98 and 98.34, and this will have a negative impact on the rupee.

Data released by the US Energy Information Administration (EIA) showed that crude oil inventories have substantially increased, exerting downward pressure on the global crude price, which is favourable for the rupee. However, a rising dollar could outweigh it and dampen the domestic currency.

The rupee opened today’s session at 71.08, below the support. However, only a daily close below 71 can be taken as a bearish confirmation. Hence, traders are advocated to tread with caution at the current juncture.

Supports: 71.2 and 71.4

Resistances: 70.89 and 70.75

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