Technical Analysis

Daily Rupee call: Buy INR with a tight stop loss

Akhil Nallamuthu | Updated on October 19, 2020 Published on October 19, 2020

BL Research Bureau

Last week, the rupee (INR) ended 21 paise lower against the dollar (USD), it ended at 73.34 versus 73.13 – its previous week’s close. As it has closed below the support of 73.3, the bears might be looking to take advantage. Even today, though marginal, the local currency has begun lower at 73.37

If sellers drag the rupee, the exchange rate could move to 73.5 – a potential support for the local currency. Support below that level can be spotted at 73.7. But if INR gains and rallies above 73.3, it will likely face a hindrance at 73.15. Beyond that level, it can face resistance at 73.

The data on foreign inflows look good in the current month. That is, the net investments (including all categories) of Foreign Portfolio Investors (FPI) as on last Friday stood at ₹7,440 crore. Out of this, equities was the single biggest gainer, attracting a net inflow of ₹8,489 crore so far this month. Other categories like debt, hybrid and investment through voluntary retention route remained negative.

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday shows that the total foreign reserves increased by a significant $5.9 billion between October 2 and 9 to $551.5 billion. Foreign Currency Assets (FCA), the largest component of the reserves, was up by $5.7 billion to $508.8 billion during the corresponding period. Whereas the value of gold holding was largely unchanged at $36.6 billion. Large foreign reserves can be good for the domestic currency as it can be an effective tool in managing unexpected volatilities in the exchange rate, thereby increasing confidence.

Dollar index

The dollar index ended last week on a positive note after registering loss in the preceding two weeks. It gained by about 0.7 per cent as it ended the session at 93.68 versus previous week’s 93.06. Even though the price action in the past week is hinting at a positive bias, the index remains below the key barrier at 94. Until this level is breached, bears will stand a chance to turn the tide in its favour. Given that, a breach of 94 can be considered as shift in short-term trend to bullish; until then, the long dollar trades need to be cautious.

Trade strategy

Though the rupee has opened marginally lower and has been inching up today, it has a considerable support at 73.5. Also, as indicated by the dollar index, the trend has not really shifted in favour of the greenback. Considering this, traders can go long in INR with a tight stop-loss for intraday.

Supports: 73.5 and 73.7

Resistances: 73.3 and 73.15

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Published on October 19, 2020
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