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Rupee began slipping against the greenback this week. Talks of Greece defaulting once again caused turbulence in financial markets. Stock prices crashed and the rupee declined below the 56-mark. The sentiment in the currency was also roiled on the opposition shown by various political parties to policy reforms. Further, strength in the dollar also negated the positive impact of FII inflows into secondary market. These investors have net purchased $1.6 billion in secondary market in July.
Euro recorded a new multi-year low at 1.20 against the dollar. Next long-term support for this currency pair is the June 2010 low of 1.19. There could be mayhem once this low is breached.
The dollar index has moved beyond the key long-term resistance at 82.6. Next resistance for this index is the August 2010 peak at 83.5. If this level is crossed, the index can move on to the 2010 peak at 88.7.
Dollar rupee
Rupee is reversing lower from the July peak of 54.1. Since the rupee pair could not even retrace 38.2 per cent of the down-move from February 2010 peak, it implies that the medium-term trend in the currency stays down. The currency could spend a few more weeks in the range between 54 and 57 before it decides on its next direction.
Extrapolation of the move from the 48.6 peak gives us the first target at 59.5. On the other hand, move above 54 gives us the next targets at 52.9 and 51.9 over the medium-term. Even if conditions improve, the Indian currency is likely to halt around 52 over the months ahead.
For the short-term, rupee has support at 56.1. Reversal from this level will push the currency higher to 54.2, 54 or 53. Short-term target on move below 56.1 is 56.6 and 57.3.
USD-INR futures
This contract is pausing at key short-term resistance at 56.2. Fresh long positions are advised only on close above this level. Next short-term target will be 57 and 57.4.
Short-term supports for the contract are at 55.5, 55 and 54.3. Traders can hold their long positions with stop just below the first support.
EUR-INR futures
This contract is moving sideways in a narrow range between 67.1 and 68.1 since July 16. This narrow move follows a prolonged down-move from the 71.8 peak. Unless the currency manages to move above 68.9, there is a likelihood of the contract declining further to 65.8 or 65.3 over the months ahead.
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