Technical Analysis

Daily rupee call: Dollar rally could weigh on rupee

Akhil Nallamuthu | Updated on March 02, 2021

The rupee (INR), even though it opened with a significant gap-down yesterday, reduced losses by ending the session at 73.55 against the dollar (USD) yesterday. It had begun Monday’s session at 73.77 against 73.46 – Friday’s closing level. Thus, the rupee, which saw a sharp fall on Friday, seems to be recovering well.

Following this, INR has opened with considerable gap-up today at 73.35 versus USD. If the rally extends, it is likely to face resistance at 73.15 and then at 73.00. A breach of 73.00 can intensify the rally. On the other hand, if the bears come back again and drag the domestic currency, it can find support at 73.50 and 73.70.

The rupee gained yesterday even as the foreign inflows was not that significant. The net investments by foreign portfolio investors (FPI) on Monday stood at ₹125 crore. FPI inflows have been an important factor in keeping the rupee afloat. Hence, how the funds flow will shape up in the coming days, can have an impact of the exchange rate of USDINR.

Dollar index

Bulls had an upper hand in the dollar index on Monday and thus extended the uptrend from last week. Notably, it has closed slightly above resistance at 91.00 and today, it has been trading with a positive bias. Currently trading at 91.23, the index will most likely appreciate towards resistance at 91.50, a break-out of which can attract fresh buying, lifting the dollar further. The price action indicates that this is likely and can weigh on the Indian currency.

Trade strategy

Though the rupee has begun the session on the strong foot, the dollar index indicates that the greenback could post further gains, which can be a drag on the local currency. Hence, the rupee can be expected to stay flat from here or gradually move southwards. So, traders need to be cautious and sell rupee with stop-loss at 73.35, if it slips below the support of 73.50.

Supports: 73.50 and 73.70

Resistances: 73.15 and 73.00

Published on March 02, 2021

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