Rupee remains range bound

BL12_rupee

Overall bias is negative as the key resistance around 67.70 may cap the upmove

The rupee continues to remain volatile. The currency made a high of 67.75 initially but reversed sharply lower from there to make a low of 68.39 on Wednesday. However, a weak dollar gave some relief to the rupee and helped it recover and close at 68.08 on Thursday.

The dollar index (101.15) broke below an important support at 102. Although it spiked to test 103 after President-elect Donald Trump’s first press conference on Wednesday, it gave back all the gains immediately to decline below 102. Trump did not provide details of his plans in the first press conference, which resulted in dragging the dollar index lower.

A crucial support for the index is at 100.70. Whether the index manages to sustain above this support or not will decide the next move for it. So, the price action in the coming days will be key. A strong break below 100.7 can take the index lower to 100.5 and 100.2. Such a break will also increase the likelihood of the index revisiting 100 or even lower levels thereafter. But on the charts, the level of 100.7 is a strong support and an immediate break below it is less probable. Therefore, a reversal in the coming days may see the dollar index rising to 102 and 103 levels once again.

Rupee outlook

The Indian currency has remained broadly range-bound and volatile between 67.7 and 68.35 over the past four weeks. Within the range, the currency is currently moving up after testing the lower end of the range. However, a series of resistances between 67.90 and 67.70 may restrict the pace of the upmove in the rupee in the coming days. The currency is likely to reverse lower again as a break above 67.70 looks less probable.

Key resistance is at 68.40. A strong break below it can take the rupee lower to 68.7 and 68.85 in the short term. As explained earlier in this column, the region between 68.80 and 68.85 is a crucial support zone. A strong break and a weekly close below 68.85 will keep the medium-term bearish view intact. Such a break will drag the rupee lower to 69 initially. Further fall below 69 will increase the likelihood of the rupee weakening to 69.6 and 70.25 over the medium term.

The short-term view for the rupee will turn positive only if it manages to climb above 67.70. In such a scenario, the rupee can strengthen to 67.50 and 67.30 in the short term.

Published on January 12, 2017
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