Money & Banking

Technical Analysis: Rupee retracts from key hurdle

Updated on: Oct 09, 2012

The rupee hit a peak of 51.35 against the dollar on Friday before reversing lower in that session. Continued reforms push by the Government, with the Cabinet approving increased foreign direct investment in pension and insurance and amendments to the Companies Act and Forward Contract Regulation Act, helped the rupee move above the 52-mark. But doubts that the Government might be unable to to ensure safe passage for these amendments in Parliament pegged back the rupee again. Interestingly, FIIs bought stocks worth $776 million last Friday, when equities declined, taking their tally for October to $1.6 billion. Oil companies and other importers buying dollars also sent the rupee lower. The three-month rupee forwards in the non-deliverable forwards are trading at 53.3, implying a downward bias. Dollar index is attempting to reverse higher from the key support around 78. But the reversal isn’t too strong implying that the index could move sideways in the band between 78 and 80 for few months.

Dollar-Rupee outlook

The rupee briefly rallied above the key resistance at 51.9 on Friday. But it moved below this level in the next session which means that the 51.9 level continues to be strong hurdle for the rupee. Support that needs to be watched now is at 53.6. If the current slide halts at this level, the currency could spend few more weeks in the band between 51.5 and 53.6. Medium-term outlook will turn negative only on strong close below this level. Subsequent supports are 54.3 and 55. The band between 51.4 and 52 will be a strong resistance for the rupee in the sessions ahead. The structural trend in the rupee is down. The corrective rally from 57.3 halting around 52 underlines this fact. We stay with the view that strong close beyond 51.9 is needed to reverse the long-term view.

USD-INR futures : These futures behaved in line with our expectation, hitting the intra-day low at 51.6 on Friday and reversing sharply higher from there. The short-term trend is now up and the contract can move up to 53.3 in the days ahead. Targets on move beyond this level would be 58.9 and 54.4. Traders can hold their long positions with stop at 52.1.

Euro-INR futures: This contract once again halted its slide at the key support at 67 and reversed higher on Friday. But it was unable to get past the short-term resistance at 68.8. Traders can play short with stop at 69. The contract can decline to 67.7 or 67 again in the days ahead.

Published on March 12, 2018

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