The Indian currency strengthened to 45.45 on Tuesday following RBI's move to increase key short-term lending and borrowing rates by 25 basis points.

But this up-move could not sustain and rupee resumed the downward trajectory it is following since January 4. Weakness in equity markets, continued FII outflows and strength in crude prices were the factors applying downward pressure on the Indian currency. On the other hand, exporters selling dollars at lower level is preventing a steep decline.

Dollar continued to weaken against other major currencies and the dollar index traded on Intercontinental Exchange declined to 77.8. This is a key short-term support for the index. Decline below this level will usher in a fall to the November trough at 75.2.

Dollar-Rupee outlook

Short-term trend in rupee is down since the peak of 44.6 recorded on January 4.

This downtrend can extend to 46.1 or 46.3 in the days ahead. But the currency has strong support around 46.3 and reversal from this level can make the currency appreciate towards 45.4 or 44.8 in the days ahead.

Medium-term view for the currency is sideways in the band between 44 and 46.3. However, close below 46.3 will mar this view dragging the currency lower to the long-term support at 47.2.

USD-INR futures

USD-INR futures struggled to move above the resistance band between 45.75 and 45.8 indicated in our last column. Short-term chart pattern appears to be a consolidation with the possibility of the contract moving on to 46 or 46.35 in the days ahead.

Traders can hold their long positions with stop at 45.4. Subsequent supports are at 45.3 and 45.2.

EUR-INR futures

This contract is moving from strength to strength in line with our expectation.

Since it has moved above the short-term resistance at 61.5, it can now move on to the next target of 63.2 in the days ahead. Traders can trail their stop-loss at 1 per cent to protect their profits.

Move above 63.2 will make the medium-term outlook positive for this contract giving the medium-term target at 65.3.

GBP-INR futures

GBP-INR futures struggled to move past the resistance at 73 indicated last week and collapsed to our first support at 72.1 on Tuesday. We stay with the view that traders can hold their long positions as long as the contract trades above 72.1. Subsequent supports are at 71.6 and 70.8.

JPY-INR futures

JPY-INR futures is still testing the strong short-term resistance at 55.6.Target above this resistance stays at 56.3. Short-term supports are at 55 and 54.6.

BL Research Bureau

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