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The rupee (INR) weakened slightly on Thursday and it closed the session at 71.31 against the previous close of 71.27 against the dollar (USD). The immediate support from the current level is at 71.4.
As 71.4 is a substantial support, there is a likelihood that the downtrend may be arrested at that level. Taking that support if the local currency moves up, it will face a hurdle at 71.2. Above that level, the resistance is at 71.
The dollar seems to be moderating and as a result, the dollar index has been on a decline since yesterday. The resistance band between 97.8 and 98 capped the rally and it has corrected to 97.45. Further weakness is highly likely and the index could decline towards the support at 97.2, below which the support is at 96.7. The immediate resistance above 98 is at 98.45.
Trade strategy:
Though the rupee has been in a downtrend for the past two weeks, fresh short positions are not recommended at current levels as it is nearing an important support at 71.4. Moreover, the dollar index might witness a correction since it is facing a stiff resistance. Considering this along with the risk-reward ratio, traders are advised to initiate rupee longs on dips and place stop loss at 71.6.
Supports: 71.4 and 71.6
Resistances: 71.2 and 71
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