Money & Banking

Medium-term trend sideways in rupee

Lokeshwarri S.K. BL Research Bureau | Updated on January 19, 2011 Published on January 19, 2011


Volatility continued in forex markets with rupee declining sharply against the greenback to record the trough of 45.6. Weakness in equity markets with Sensex declining below 19,000 and foreign institutional investors drawing out close to Rs 2,705 crore from equity markets in the past five sessions was the principal cause behind rupee weakness. Crude climbing above $92 mark also caused some consternation.

Surprisingly, dollar too declined against other major currencies in this period. Dollar index traded on ICE declined to the low of 78.6. This index can now decline to 78.5 or even 77.8. The short-term view will turn negative only on an emphatic close below 77.8.

Dollar-Rupee outlook

Rupee could not rally past 45 and declined to 45.5 in line with our expectation. The currency would receive strong short-term support at 45.5. Strong decline below this level will take the currency pair to 45.9 or 46.1. Short-term resistances are at 45.2 or 45.

Medium-term view for the currency is sideways in the band between 44 and 46.3. The long-term trend in the currency, however, continues to be up. Failure to move below 46.3 will indicate a propensity to appreciate above 44 over the next couple of years.

USD-INR futures

USD-INR futures reversed higher from our first short-term support at 45.2 and headed to the peak of 45.7. The contract faces strong resistance in the band between 45.75 and 45.8. Short-term traders can therefore book partial profits if the contract struggles to move beyond this zone. Targets above 45.8 are 45.9 and 46.3. The contract also faces strong medium-term resistance at 46.3 and traders should watch out for sudden reversals from this zone.

Short-term supports for the contract are at 45.3 and 45.1.

EUR-INR futures

EUR-INR futures did a volte face contrary to our expectation and bounced beyond the peak at 60.5. The two day close below 58.8 turned out to be a false break-down and bear-squeeze has taken the contract sharply higher. Immediate target for the contract is 61.5. Sharp close above this level can take the contract to 63.2.

Traders can hold their long positions with stop at 60. Subsequent supports are at 59.5 and 58.6.

GBP-INR futures

GBP-INR futures zoomed higher, far above our outer target to the peak of 73.2 on Tuesday. The contract faces strong resistance around 73. Strong break-out beyond this level can take the contract to 74.3. Short-term supports are at 72.1 and 71.4. Traders can hold their long positions as long as the contract trades above the first support.

JPY-INR futures

JPY-INR futures reversed higher from our first support and went on to the peak of 55.3 on Tuesday. The contract faces strong resistance around 55.6. Next target is at 56.3.

Published on January 19, 2011
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