Technical Analysis

Daily Rupee call: Buy INR if it softens

Akhil Nallamuthu | Updated on August 28, 2020

BL Research Bureau

The rupee (INR) gained about 50 paise against the dollar (USD) on Thursday, ending the session at 73.81; it effectively closed above the crucial resistance of 74. This makes the case stronger for rupee bulls and going forward, the exchange rate movement could well be in favour of the Indian currency.

Today, INR opened on a flat note at 73.83 and advanced to 73.6. While 73.5 can be the nearest hindrance, a breakout of that level can take it to 73.15. But in case if the local currency weakens, 73.73 can be a support. Immediately below this level is the support at 73.85, essentially making the price area between 73.73 and 73.85 a good support band.

The primary factor that has been working for the rupee recently is the substantial inflow by way of Foreign Portfolio Investments (FPI). On Thursday, the net inflow, i.e. equity and debt combined, was recorded at ₹1,164 crore, taking the weekly net inflow number to about ₹4,450 crore. This is expected to continue at least in the short-term, and this is a good upward force for the rupee.

Dollar index

The dollar index that looked weak in the first half of the session yesterday managed to do well in the latter half and ended the day marginally higher. However, it is still trading below the 21-day moving average and well below the critical hurdle of 94. So, the recovery might not sustain and most probably, the dollar index will decline from the current level of 92.7 sooner or later. Along with good FPI inflow, the dollar weakness can push the rupee upwards.

Trade strategy

The rupee, after opening flat, is exhibiting a significant bullish bias. After beginning the session at 73.83, it rallied sharply and is now trading around 73.6. Though the momentum is with the rupee bulls, the risk-reward ratio for new long trades at current levels are not favourable. So, traders can either go long in INR with a tight stop-loss if it moderates to 73.7 or go long with a tight stop-loss if it breaches the resistance at 73.5.

Supports: 73.73 and 73.85

Resistances: 73.5 and 73.15

Published on August 28, 2020

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