The rupee trudged sideways in the narrow range between 48.5 and 49.5 over the past week. Strength in equity market and foreign institutional investors turning net buyers supported the Indian currency. Exporters selling dollars was the other reason that contributed to the currency's strength. However 1-month forward for the dollar-rupee pair in the NDF market is trading at 49.5, while the 3-month forward is trading at 50 implying a downward trajectory in the upcoming weeks.

Lower risk-aversion made the euro gain further ground against the dollar last week. But turbulence returned on Monday on slowing GDP growth in China and the German Finance Minister, Mr Wolfgang Schaeuble's statement that a definitive solution to the Euro zone troubles is not imminent.

The dollar index that tracks the movement of the dollar against a basket of six currencies recorded a low of 76.4 on Monday. We stay with the view that the index needs to close below 75.9 to reverse the near-term view downwards.

Dollar-rupee outlook : This pair moved in line with our expectation, largely moving in the band between 48.8 and 49.5. The only incursion above the upper end of the band was on Monday when the currency recorded the intra-day high of 48.68.

Key short-term resistance for the rupee will be at 48.2. The currency needs to move above this level to make the short-term view positive. We continue to hold the view that prolonged movement in the band between 48.5 and 50 will indicate a propensity to move down to 50.5 or 51.5 over the upcoming weeks.

The medium-term trend will stay down as long as the currency pair trades below 47.6. Subsequent targets are 46.9 and 46.2.

USD-INR futures : Moved fleetingly below the short-term support at 48.8 on Monday. But it bounced higher during the trading session to close at 49. Short-term traders can continue to trade in the range between 49 and 50. Strong break above 50 gives us the targets of 50.4 and 51.5. Supports below 48.8 are at 48.6 and 48.3.

EUR-INR futures : Moved in a very narrow band between 67.4 and 67.9. Traders can hold the contract with stop at 66.8. If the contract holds above this level, break out to 68.6 is likely in the upcoming sessions. Supports below are at 66.5 and 66.2.

GBP-INR futures : Hovered above the 77 support that we had indicated last week. Traders can continue to hold the contract as long as it trades above this level. Short-term targets stay at 78.1 and 79.5.

Short-term supports are at 76.6 and 75.9.

JPY-INR futures : Continued to meander in the range between 63 and 64.7. Traders can continue to hold their long positions with stop at 63.3. Short-term targets are 65.5 and 66.7.

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