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Chennai, January 8
The rupee (INR) faced a considerable sell-off in the last session to settle at 73.32 i.e., 21 paise lower versus the preceding close of 73.11 against the dollar (USD). Thus, the resistance at 73 looks strong. Today, INR has opened with a gap-down at 73.39 and is now testing support of 73.40. A break below this level can drag the local currency to 73.50. A breach of this level can intensify the sell-off. But if it appreciates on the back of the current support level, the nearest hurdle it can face is at 73.25. Above that, the resistance levels are seen at 73.15 and 73.
Foreign portfolio investors (FPI) seem to be back in buthe ying mood after remaining net sellers on Wednesday. That is, the net FPI investments stood at ₹382 crore (equity and debt combined) yesterday. For the week so far, the net inflow stand at nearly ₹2,730 crore. Steady foreign flows can help the rupee gain ground against the dollar.
Dollar index
Despite opening with a gap-down yesterday, the dollar index picked up momentum intra-day and surged to close the session at 89.83 versus Wednesday’s close of 89.53. It has begun today’s session on a flat note and is testing resistance at 90. If this level is taken out, it can potentially rally to 90.50. But if it falls on the back of the resistance at 90, it can decline to 89.50.
Trade strategy
A loss in yesterday’s session and a gap-down open today by the rupee is clearly a bearish sign. However, the price band of 73.40 and 73.50 is a support for the Indian currency. Considering this along with the movement of the dollar index, which is now trading near a resistance, the likelihood of rupee moving up looks higher. Also, this makes the risk-reward ratio favourable for long positions in the rupee.
Hence, traders can be cautiously bullish and initiate rupee longs with a stop-loss at 73.50. Stick to the stop-loss strictly, as a break below 73.50 can result in a sharp fall in the rupee.
Supports: 73.40 and 73.50
Resistances: 73.25 and 73.15
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