Rupee continued declining against the greenback, briefly dipping below the 55-mark on Monday. There was a slew of negative economic data released in that session with dismal industrial production numbers for September, CPI growing at an unrelenting 9.75 per cent and surging trade deficit for October. This coupled with demand for dollars from importers and weakness in equity market pulled the Indian currency lower. There could be some relief for the rupee on Thursday as the WPI growth in October has moderated to 7.45 per cent. The dollar index continuing to move higher is also contributing to rupee weakness. This index has gained almost 2 per cent since October 17. Next target for this index is 81.9.

Euro Rupee

Interestingly, rupee has also weakened against the Euro since October 5, down 4 per cent in this period. This pair is moving in a narrow band between 69 and 70 since October 18. The long-term base for Euro-rupee is between 71.5 and 72. Rupee could attempt to get to this level over the coming months. This view will be negated only on a close above 68.2.

Dollar rupee outlook

Rupee reached the key short-term support at 55 on Monday. As explained in our last column, since this occurs at 61.8 per cent retracement of the rally from June trough, the short-term trajectory will be decided on the movement of the currency here on.

Failure to decline below 55 will mean that the currency can strengthen to 53.6 or 52.8 again. Rally above 52.8 is needed to indicate that the near-term outlook has reversed higher. Decline below 55 will imply that the Indian currency could move on to 56 and then to its previous life-time low at 57.3.

USD-INR futures

Our view on this contract remains unaltered. The USD-INR futures faces stiff resistance around 55.2 and the contract is currently halting here. Short-term traders can hold their long positions with stop at 54.1. Targets on break above 55.2 remain at 56 and then 57.3.

Supports for this contract are at 53.4 and 53.

Related Topics
comment COMMENT NOW