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The rupee (INR) managed to hold onto the support at 71.4 even though it faced some pressure against the dollar (USD) on Friday. After weakening in the first part of the session, the domestic currency began appreciating and closed at 71.2 against 71.29, its previous close.
Though there is a resistance at 71.2, chances for rupee appreciation is more as long as it trades above the support at 71.4. Above 71.2, the resistance is at 71. On the other hand, if the local currency declines, 71.4 and 71.6 will act as key support.
After closing with a loss for five consecutive days, the dollar gained on Friday and as a result, the dollar index closed in the green. After making a low of 97.2, it ended the session at 97.66 versus its previous close of 97.37. The index is currently hovering around the resistance at 97.67. If the dollar attracts more buying, the index can be expected to advance to 98. We can also observe that the 21- and 50-DMAs coincide with that level, making it more significant. Alternatively, if bears regain strength, it may retest the support at 97.4.
Today, the rupee has opened slightly higher at 71.27 versus its previous close of 71.2. The rupee is trading above the key level of 71.4 whereas the dollar index is trading around a resistance. Thus, one can approach the Indian currency with bullish bias.
Trade strategy:
Since we cannot reject the possibility of rupee retesting the support at 71.4, traders are recommended to wait and initiate rupee longs if the exchange rate of USDINR reaches 71.35 with 71.6 as stop-loss.
But in case if the local currency decisively breaks out of the resistance at 71.2 straightaway, without retesting the support at 71.4, rupee longs can be initiated with a tight stop-loss.
Supports: 71.4 and 71.6
Resistances: 71.2 and 71
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