BL Research Bureau

The rupee (INR) settled with a marginal gain yesterday at 74.79 compared to the previous close of 74.83 against the dollar. In effect, the currency pair closed within the range between 74.7 and 74.9.

Today, the local currency has begun the session at 74.83. The sideways range mentioned above still stays valid, and the next leg of trend can be confirmed based on the direction of the break. If the rupee rallies past 74.7, it can move to 74.5. A break out of this level can lift INR to 74.35. But if it depreciates and breaches the support area between 74.9 and 75, a new wave of selling could come in, dragging the rupee to 75.15 and subsequently to 75.3.

The rupee has managed to stay in a range despite Foreign Portfolio Investors (FPI) being on the sell side. Yesterday, the FPI net outflow stood at a little over ₹350 crore (equity and debt combined), taking the weekly tally to about ₹550 crore. As the amount of outflow is relatively lower, INR can stay afloat. However, if the selling increases to substantial levels, the support at 75 will face a litmus test.

Dollar index:

Following a minor corrective rally, the dollar index declined yesterday and made a fresh two-year low of 93.18. The price pattern indicates that there is more scope for the bears. The index might potentially drop to 93 with subsequent support at 92.5. A decline in the dollar index can be positive for the Indian currency.

Trade strategy:

The rupee remains within the range and is currently trading near the support of 74.9. Since the bulls have an advantage until INR stays above 75 and considering the risk-reward ratio at the current levels, traders can go long in the rupee for intraday with stop-loss at 75.

Supports: 74.9 and 75

Resistances: 74.7 and 74.5

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