The rupee kept everyone on the edge by hovering very close to the crucial 44-mark and even breaching it once, fleetingly. Strong inflows through foreign institutional investors and weak dollar helped maintain strength in the Indian currency last week. But demand for dollars from importers made the currency retract from the 44-mark again.

If we look to the non-deliverable forward market for clues, one-month forwards are trading at 44.7 while three-month forwards are available at 45.1 implying that these markets are not factoring-in a move above 44 just yet.

It was a week in which the euro ruled supreme, trading at 15-month high against the dollar. The currency got a boost due to the 25 basis points interest rate hike by ECB, and then the buzz that China was buying Spanish debt helped it rally further. Strength in yen on escalation of the nuclear crisis further weakened the dollar, making the dollar index decline to 75 on Wednesday. Next support for this index is at 74.1.

Dollar-Rupee outlook

The rupee moved above the resistance at 44.2 to record the high of 43.9 on April 8. But the currency reversed sharply from there to attain the low of 44.6 on Wednesday. The support that needs to be watched carefully now is around 44.75. If the currency holds above it, the near-term outlook will stay positive. A rally to 44.2 or 44 becomes possible then.

It needs to be borne in mind that the currency had recorded the peak at 43.97 on October 15, 2010, too. The long-term resistance around 44.2 indicated last week will also prove to be a strong hurdle in the near-term.

However, a strong close above 44 will mean that the long-term uptrend from the March 2009 low of 52.1 is extending. This wave has the minimum target of 42.8. The long-term trend is currently up and close below 47.2 is needed to negate this view.

USD-INR futures

USD-INR futures moved in line with our expectation to record the low of 44.1 on Friday. The contract faces immediate resistance at 44.7 and fresh long positions are advised only on a strong close above this level. Subsequent targets are 44.9 and 45.

Traders with a greater penchant for risk can go short at these levels with stop at 44.75. The downward targets would be 44.3, 44.1 and 43.5.

EUR-INR futures

EUR-INR futures moved contrary to our expectation, reversing sharply higher to record the peak of 64.7 on Wednesday. This up-move can extend to 65.8 or 66 over the medium-term. Traders can hold their long positions with stop at 64.

GBP-INR futures

GBP-INR futures are struggling to move above the resistance at 72.7 indicated last week. Chart patterns over the last few sessions indicate a positive undercurrent and the possibility of a break higher to 73 or 73.4 in the days ahead.

Traders can hold the contract with stop-loss at 72.15. Next support is at 71.8.

JPY-INR futures

JPY-INR futures reversed higher from 51.7 to reach the high of 53.2. The contract faces resistance at 53.5 and traders can hold their short positions with stop at 53.6. Inability to get above this level can pull the contract down to 52.3 or 51.7 in the days ahead.

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