Rupee eased slightly against the dollar after recording the life-time low at 56.38 on Thursday. The Government's move to rationalise fuel price worked positively on the sentiment in foreign exchange market. Slight recovery in stock prices and the dollar index pausing its rally also contributed to rupee strength. One month forward in the Non Deliverable Forward market is trading at 56.1 denoting a bearish bias in the Indian currency.
Euro is hanging on to the support around 1.25 against the dollar. This currency pair is, however, closing lower everyday implying that the short-term trend continues to be down. The currency can break lower to the next support at 1.18 that was the trough formed in June 2010. The Euro needs to close above 1.35 to signal that the worst is over from a near-term perspective.
The dollar index that tracks the movement of the greenback against a basket of major currencies is currently moving sideways just below the resistance at 82.5. The short-term trend in this index continues to be up and there is a strong likelihood of the index breaking out to 88.7 in the upcoming sessions.
The dollar rupee rate reversed last week. But this retraction halted at the short-term resistance at 55.07. Inability to move above this level will mean that rupee will once again decline to 56.4 or 57.3 again in the near term.
Subsequent resistances will be at 54.7 and 54.26. Near-term trend will reverse higher only if the currency goes on to close above 54.3. Since this level also coincides with the previous trough formed in December 2011, this level gains added significance as a critical hurdle.
Key medium-term resistance for the rupee is at 53.4.
USD-INR futures
This contract recorded the high of 56.4 on Thursday and reversed lower in that session. Key short-term support for the contract is at 55. Traders can hold on to their trading long positions as long as the contract trades above 55. If this level holds, it will mean that the contract can move higher to 56.4 or 57.1 in the upcoming sessions.
Short-term supports for this contract would be at 54.6 and 54.2. Key medium-term support would be at 53.5.