Technical Analysis

Daily rupee call: Go long above 73.15

Akhil Nallamuthu | Updated on October 05, 2020 Published on October 05, 2020

Last Thursday, the rupee (INR) gained by 0.85 per cent and ended the session at 73.14 against the dollar (USD). Following the positive close, the local currency has opened flat today at 73.15. If INR rallies past 73.15, it can appreciate to 73 – a resistance level. Above this level, it can rally to 72.8. But if the domestic unit weakens, the immediate supports are at 73.3 and 73.5. Subsequent support is at 73.7.

The Foreign Portfolio Investors (FPI) were net sellers in the month of September – the net outflow stood at Rs 1,196 crore according to the National Securities Depositories Limited (NSDL). The equity segment marked an outflow of Rs 7,783 crore, whereas the debt segment witnessed an inflow of Rs 3,958 crore. Notably, the hybrid segment – REITs and InvITs – attracted net inflow of Rs 2,222 crore. As we can see, the overall FPI fund flow remained negative because of the outflow in the equity category. Going ahead, if the FPIs continue to sell domestic assets, the rupee can witness downward pressure.

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India last Friday shows that the total foreign reserves came down by $3 billion between September 18 and 25 to $542 billion. Foreign Currency Assets (FCA), the largest component of the reserves, was down by $1.5 billion to $500 billion during the corresponding period. Similarly, the value of gold holding has reduced to $36 billion i.e. a decrease of $1.4 billion. Though the total reserves have moderated, it is still near all-time high levels. Higher foreign reserves can be an effective tool in stabilising the exchange rate of USDINR.

Dollar index

The dollar index lost nearly one per cent last week as it ended at 93.84 versus the preceding week’s close of 94.64. However, it stays above the 21-day moving average. But since it lies below the crucial level of 94, the index is likely to trade with a bearish bias. Currently trading at 93.75, the nearest support can be spotted at 93.5 and 93.25.

Trade strategy

The rupee, which opened flat, is hovering at 73.15 which can act as a resistance. So, even though the trend is inclined to upside, traders can buy INR with tight stop-loss if it breaks out of 73.15.

Supports: 73.3 and 73.5

Resistances: 73 and 72.8

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Published on October 05, 2020
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