Technical Analysis

Daily Rupee call: Buy INR with tight stop-loss

Akhil Nallamuthu | Updated on June 16, 2020 Published on June 16, 2020

BL Research Bureau

The rupee (INR) has begun the session with a gap-up as it has opened at 75.89 versus yesterday’s close of 76.03 against the dollar (USD). Thus, it has moved above the crucial level of 76; if the local currency can sustain above this level, it might witness a rally today.

The immediate hurdle from the current level can be spotted at 75.8, above which the exchange rate is likely to move towards 75.6. On the other hand, if rupee weakens and breaks below 76, it might decline to 76.3 and 76.5.

The rupee managed to hold on to the important level of 76, even as the Foreign Portfolio Investors (FPI) dumped domestic assets significantly. On Monday, the net outflow of the FPI stood at ₹2,960 crore (equity and debt combined). But if the selling continues, the rupee might not be able to stay above 76.

Deficit shrinks

The government data released yesterday showed that the trade deficit narrowed in May 2020 to $3.15 billion compared to $15.36 billion in May 2019. Exports dropped to $19 billion from $30 billion a year earlier whereas imports fellto $22.2 billion from $45.5 billion during the corresponding period. Similarly, the deficit came down on a sequential basis too where it was $6.76 billion in April 2020. The trade deficit shrank as imports fell quicker than exports and this is clearly positive for the rupee.

Dollar index

The dollar index seems to have resumed its downtrend as it closed with a loss yesterday; also, it has fallen below the support of 97. It posted a gain in the preceding two trading sessions, but the rally seems unsustainable. The price action indicates further decline where the index could head lower to 96.25 and 96, which can be positive for the Indian currency.

Trade strategy

The rupee, which traded below the support level of 76 briefly, has moved above that level. Until it remains so, it can be bullish biased. So, traders can buy the rupee with tight stop-loss for intraday.

Supports: 76 and 76.3

Resistances: 75.8 and 75.6

Published on June 16, 2020
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