Technical Analysis

Daily rupee call: Buy INR above 74.9

Akhil Nallamuthu | Updated on August 10, 2020 Published on August 10, 2020

The rupee (INR) settled with a minor loss last week, as it ended the session at 74.93 versus its previous week’s close of 74.81 against the dollar (USD). Nevertheless, the Indian currency remains within the range between 74.7 and 75 and unless either of these levels is breached, it cannot be expected to trend either way.

If the domestic currency takes support at 75 and rises, the resistances that it is likely to face are at 74.8 and 74.7. A breakout of 74.7 can attract more buying interest in the rupee, possibly taking it to 74.5. On the other hand, if the domestic unit slips below the support of 75, it can depreciate to 75.1 and 75.3

Foreign Portfolio Investors (FPI) have been positive in the first week of the month. The net inflows so far stand at ₹11,304 crore (equity and debt combined). While this can largely be attributed to a block deal in one particular stock, the inflows are anyway positive for the rupee. Notably, the inflow in July stood at ₹3,301 crore.

Foreign reserves

India recorded yet another all-time high in foreign reserves. The weekly statistical supplement released by the Reserve Bank of India last Friday showed that FX reserves stand at $534.6 billion as on July 31. This is a substantial increase of $11.9 billion in the period of one week i.e. between July 24 and July 31. Foreign Currency Assets (FCA), the largest component of reserves, was up by $10.3 billion to $490.8 billion, from $480.5 billion during the corresponding period. The value of gold holdings increased by $1.5 billion to $37.6 billion.

Dollar index

The dollar index closed flat last week and price action in the daily chart indicates that it might be heading towards a sideways trend between 93.5 and 94. So, even though the major trend is bearish, the index should break below 93.5 to confirm the next leg of downtrend. Until then, the index might continue to consolidate.

Trade strategy

The rupee has been flat since the session open and is hovering around 74.9. Even though the risk-reward ratio favours a long position, go long only if INR decisively moves past 74.9. Place stop-loss at 75.1

Supports: 75 and 75.1

Resistances: 74.8 and 74.7

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Published on August 10, 2020
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