Technical Analysis

Daily Rupee call: Buy INR with tight stop-loss

BL Research Bureau | Updated on September 16, 2020

Losing nearly quarter per cent, the rupee (INR) yesterday closed at 73.65 after marking an intraday low of 73.73 against the dollar (USD). Today, the local currency began the session at 73.69; and 73.7 is a strong support. If INR weakens below this level, the nearest support is 74. A breach of 74 can result in another leg of downtrend. But if INR rises on the back of the support of 73.7, it is likely to face resistances at 73.5 and 73.3. Subsequent resistance is at 73.15.

The Foreign Portfolio Investors (FPI) seems to be back in the comfort zone this week as they remained buyers yesterday as well. The net inflow recorded on Tuesday, was at about ₹1,170 crore (equity and debt combined). So, in the first two sessions of the current week, the net inflow adds to ₹1,468 crore. This is supportive for the Indian currency and if this trend continues for the week, the rupee is less likely to slip below the support at 73.7.

Trade deficit

Trade deficit in August increased to $6.77 billion compared to July’s $4.83 billion. That said, the deficit has been going upwards since the last three months and that, is an indication of increased activity in external trade.

Though the deficit has gone up on monthly basis, it is way lower compared to the corresponding month of the previous year --in August 2019, the deficit stood at $13.86 billion. Lower number is due to faster decrease in imports. While lower deficit is positive for the Indian currency, it is not expected to stay so over the longer period of time.

Dollar index

The dollar index remains flat and continues to hover around the support of 93 where the 21-day moving average coincides. The price actions hints that the trend can remain sideways in the near-term. The index should breach either 94 or 92.7 for us to get an indication of the next price swing.

Trade strategy

The rupee is currently trading around the support level of 73.7. This level has been acting as a buffer for the rupee in the past one week and the likelihood of this level getting breached looks low. Hence, for intraday, traders can go long in rupee. Place a tight stop-loss since a break below 73.7 can result in sharp decline.

Supports: 73.7 and 74

Resistances: 73.5 and 73.3

Published on September 16, 2020

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