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Strength in equity market and mild correction in crude oil prices buoyed sentiment in the rupee and helped it scale the hurdle at 45 easily to record the peak of 44.6. The fact that foreign institutional investors purchased almost Rs 4,200 crore worth of shares in the last five sessions also contributed in this rally.
The dollar strengthened against other major currencies on expectation that the quantitative easing programme might not extend beyond June. The dollar index reversed higher from the trough of 75.5 to move above 76.5. Immediate resistance for this index is at 76.8. Next target would be 77.5.
Dollar-rupee outlook
The rupee breached the key resistance in the zone between 44.9 and 45 on March 23 and went on to the peak of 44.6 on March 25. As we have been reiterating, the zone around 44.6 is a key resistance for the currency since it has reversed downward from here in December 2010 and again in January 2011. Strong close above this level will give the medium-term target of 44.2 and then 44.
The currency is however halting around this resistance. Short-term view will stay positive as long as the currency trades above 44.9.
USD-INR futures
USD-INR futures breached the support at 45 and went on to the low of 44.6 on March 25. Immediate resistance for the contract is at 45.06 and 45.2. Traders can initiate fresh short positions if the contract reverses from either of these levels. Downward targets would then be 44.8 and 44.6.
Fresh shorts are however not advised on a close above 45.2.
EUR-INR futures
EUR-INR futures moved contrary to our expectation, declining from the peak of 64.1 recorded on March 22 to breach the short-term trend deciding level of 63.4. Downward targets for the contract are 62.4 and 62. The possibility of a decline to these levels remains open as long as it trades below 63.6. Traders can hold their short positions with stop at 63.7.
GBP-INR futures
GBP-INR futures too reversed sharply lower on May 23 to decline to the low of 71.5. Upward targets are at 72.7 and 73.4. Failure to move above the first target will pull the contract down to 71.5 and 71.3 in the near-term.
JPY-INR futures
JPY-INR futures continued to decline and recorded the low of 54.1 on Wednesday. The contract has strong support in the zone between 53.7 and 54. If this zone is breached, the contract can decline to the next support zone at 53.2.
BL Research Bureau
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