The rupee (INR) ended last week on a flat note at 72.95 against the dollar (USD) despite witnessing higher volatility. Thus, the domestic currency closed above the support of 73, giving it an upward bias. Extending the same, the INR opened with a gap-up today at 72.87.

Appreciation from the current level can face a hurdle at 72.75. A breakout of this level can take the local currency to 72.50. But if it weakens from the current level, 73 can provide good support. In case this level is breached, it can decline to 73.15; subsequent support is at 73.25.

Data from the National Securities Depository Limited (NSDL) show that foreign flows were negative last week. That is, the net outflow for the week stood at just over ₹3,800 crore. Nevertheless, the inflow in January was positive, wherein for the whole month, the net investments stood at ₹14,631 crore. Equities remained the top segment and net inflows came in at ₹19,473 crore, while other segments like debt and hybrid saw outflows.

India’s foreign reserve holdings went up, as per the latest Reserve Bank of India (RBI) data. Total FX reserves were up by a billion dollars, at $585.3 billion as on January 29, 2021. Higher levels of FX holding is a positive factor for the rupee as it can be used to curb any unexpected volatility.

Dollar index

The dollar index ended last week with a gain at 90.58 versus the previous close of 90.24. However, it continues to trade within the range of 90 and 91. As long as it trades within these levels, the next leg of trend will remain uncertain. Above 91, the nearest resistance is at 91.50, whereas below 90, the immediate support is at 89.50.

Trade strategy

Though the rupee has opened with a positive bias, because of Budget presentation today, the current market can remain volatile. Hence, traders should tread with caution.

Supports: 73.00 and 73.15

Resistances: 72.75 and 72.50

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