Money & Banking

Rupee call: Go long on a break of 74.3

Akhil Nallamuthu BL Research Bureau | Updated on November 03, 2020

Though INR has begun the day on a positive note, traders can await signs that indicate the positive bias will remain through the day

Losing nearly half a per cent against the US dollar (USD), the Indian rupee (INR) closed below the support of 74.4 on Monday. It ended the session at 74.43 versus 74.11 ― its previous close. The domestic currency clearly looks bearish and the likelihood of further depreciation looks high.

Today, the INR opened higher at 74.34 ― a positive indication. If the domestic currency can rally from here, the immediate resistance level can be 74.2. A breach of that level can take the INR to 74 against the USD. Notably, 74 is a strong hurdle. On the other hand, in case the domestic currency slips back below 74.4, it is likely to depreciate to 74.6 and then possibly to 74.8.

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Despite a volatile session, foreign portfolio investors (FPI) looked convinced as they remained net buyers on Monday. The net investments stood at ₹740 crore (equity and debt combined). Despite this, the domestic currency ended lower on Monda. But if the foreign flows continues unabated, it can turn the tide in favour of the rupee.

Dollar index

Even as the dollar index closed above the crucial level of 94 for the second consecutive session, the price action indicates that this level is yet to be breached decisively. Today, it has opened lower and is trading around 93.95. This gives a chance for the bears to gain grip. If the dollar index declines from here, it can be positive for the INR. The nearest support levels are at 93.6 and 93.4, which coincide with the 21- and 50-day moving averages.

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Trade strategy

Though the rupee has begun the session on a positive note, traders can await signs that indicate the positive bias will remain through the day. Considering this, fresh rupee long positions can be initiated if it rallies past 74.3. Go with a tight stop-loss.

Supports: 74.6 and 74.8

Resistances: 74.2 and 74

Published on November 03, 2020

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