Technical Analysis

Daily rupee call: Bulls facing obstruction at 72.30

Akhil Nallamuthu | Updated on February 24, 2021

Although the rupee (INR) gained in the first half of the last session, it gave up all its gains in the latter half and ended the day flat against the dollar (USD). That is, the INR marked an intra-day high of 72.30, before losing ground and closed at 72.46 versus Monday’s close of 72.50.

Nevertheless, the domestic currency seems to retain the positive bias as it opened today’s session with a gap-up at 72.37. If the rally gets extended, it might face resistance at 72.15 and then at 72.00, which can be a considerable roadblock for the bulls. However, if INR weakens from here, the nearest support can be spotted at 72.50. A breach of this level can drag the local currency to 72.70.

Though the market closed with a gain in the last session, the major bull trend seems to be losing traction. In line with this, the net fund flow of the foreign portfolio investments (FPI) was negative on Tuesday i.e., it stood at ₹1,569 crore, taking the net outflow in the first two sessions of this week to ₹2,462 crore. If this trend continues, the rupee can come under pressure in the coming days.

Dollar index

The dollar index, which ended with a loss for three days straight, bounced back in the last session and posted a 0.2 per cent gain. Though not significant, the price level against which it rebounded is the key. That is, the dollar index seems to have found support at the psychological level of 90.00. Even today, after an initial decline, the dollar index has gone up a bit and is currently trading around 90.13. If the support at 90.00 stays strong and the dollar index moves up because of this, it can weigh on the Indian currency.

Trade strategy

Even though the rupee opened with a gap-up, it is struggling to go past 72.30. It has already fallen after hitting this level twice this week. Along with this, considering that the dollar index is now at a support level, today may not be a good day for buying rupee. In fact, short positions have a better risk-reward ratio at the current juncture. Hence, traders can go short in the rupee for intraday with a tight stop-loss.

Supports: 72.50 and 72.70

Resistances: 72.30 and 72.15

Published on February 24, 2021

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