Technical Analysis

Daily Rupee call: Be cautiously bullish

Akhil Nallamuthu BL Research Bureau | Updated on August 03, 2020 Published on August 03, 2020

The rupee (INR) ended marginally higher last week at 74.81 versus the preceding week’s close of 74.88 against the dollar (USD). That means, the local currency continues to remain within the range of 74.7 to 74.9.

Today, the rupee has begun the session lower at 74.89. Notably, 74.9 and 75 are the nearest support levels for the local currency. A breach of 75 can attract more sellers, possibly taking the exchange rate to 75.15 and 75.3. But on the back support, if INR appreciates, it will most likely move to 74.8 and 74.7.

National Securities Depository Ltd (NSDL) show show Foreign Portfolio Investors (FPI) were net buyers in July. The net inflow stood at about ₹3,300 crore (equity and debt combined). While the net investments in equity amounted to ₹7,563 crore, the debt segment saw net outflow of ₹2,476 crore. The Voluntary Retention Route (VRR) witnessing net outflow for the first time this calendar year, recorded net investments of minus ₹1,786 crore last month.

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday showed that the foreign reserves have hit yet another lifetime high. Between July 17 and July 24, the total reserves went up by nearly $5 billion i.e. they increased to $522.6 billion from $517.6 billion. Foreign Currency Assets (FCA), the largest component of the reserves, rose $3.6 billion to $480.4 billion from $476.8 billion during the period under consideration. The value of gold holding increased by $1.4 billion to $36.1 billion.

Dollar index

The dollar index lost about 1.1 per cent last week and with that it has posted a loss for six weeks in a row. The index is clearly in a bear grip where it registered a fresh two-year low of 92.55 on Friday, before recovering to 93.35 by the end of the session. Currently trading at 93.4, the nearest hurdle is at 93.6. Above that level lies the resistance band of 93.8 and 94. The index should breach 94 to turn register a positive outlook. Until then, bears are expected to have an edge.

Trade strategy

Though the rupee has opened with a gap-down, it still trades above the critical support of 75. Until 75 holds, the rupee will have a good chance of recovering and the risk-reward ratio is favourable for rupee long positions. So, traders can buy INR for intraday. Importantly, place a tight stop-loss because a breach of 75 can trigger sharp sell-off in the domestic currency.

Supports: 74.9 and 75

Resistances: 74.8 and 74.7

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Published on August 03, 2020
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