Money & Banking

Rupee continues to consolidate

Gurumurthy K BL Research Bureau | Updated on July 30, 2018

The Indian rupee has retained its 68.25-69.10 sideways range. The currency has been stuck in this range over the last month.

Within this range, the rupee fell to a low of 69.08 on Tuesday last week, but recovered sharply from there to make a high of 68.53 on Friday. The currency reversed lower again from this high and closed at 68.68 on Monday.

A series of major central banks meetings are scheduled this week. As such, volatility is likely in the coming days, which may increase the possibility of the rupee breaking its sideways range on either side.

The Bank of Japan meeting is scheduled to be held today. This will be followed by the RBI meeting and the US Federal Reserve meeting on Wednesday.

There are talks in the market that the RBI may increase rates again. On the other hand, the US Fed is likely to keep the rates unchanged, with rate hikes expected only in September. On Thursday, the Bank of England meeting is due. Finally, the week will end with the market’s much-watched jobs data from the US. A strong jobs number can strengthen the dollar and put the rupee under pressure.

The dollar index (94.40 now) has been oscillating between 93.9 and 95.65 over the last few weeks. A breakout on either side of this range is needed to decide the next trend.

The outcome of the US Federal Reserve meet on Wednesday might be a trigger that can set the next movement for the dollar index.

If the dollar index sustains above 93.9, an upmove to 95 and 95.65 is likely in the near term. A strong break above 95.65 can take the index higher to 96 and 96.35 over the short term. On the other hand, if the US dollar index breaks below 93.9 in the coming days, it can fall to 93.

Rupee outlook

The Indian rupee is likely to retain its 68.25-69.10 sideways range for some more time in the near term. However, as mentioned last week, the bias remains bearish as the indicators on the charts are giving negative signals.

As such, the rupee is likely to remain below 68.25. Also, even if the currency manages to breach 68.25, the next strong resistance in the 68-67.9 region can cap the upside in the rupee.

A break below 69.10 will pile up renewed pressure on the currency. Such a break will see the rupee weakening towards 69.5 and 70 in the short term.

It will also keep the medium-term bearish outlook intact for the currency to test 71 and 72 levels in the coming months.

Published on July 30, 2018

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