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BL Research Bureau
The rupee (INR) appears to have entered a short-term consolidation phase after a sharp rally on Monday. The domestic currency has closed the session flat for two consecutive days against the dollar (USD), and today, it has opened at yesterday’s closing level.
It can be observed in the daily chart that the exchange rate seems to be mainly traversing between 74.2 and 74.4. Immediately below 74.4 is the critical support of 74.5. Given the scenario, the rupee might continue to trade within 74.2 and 74.5 in the near-term.
Foreign Portfolio Investors (FPI) looks upbeat on the Indian market as the inflows have been pretty strong since the beginning of the week. This sentiment continues, and yesterday, the net inflow stood at ₹1,581 crore (equity and debt combined). With that, the net inflow for the current week has gone up to nearly ₹3,300 crore. The rupee is a substantial beneficiary of this, and the influx is likely to be robust, which can help INR gain ground against the greenback.
Dollar index
The dollar index has posted a marginal loss for two straight days and is now trading below 93. It is struggling to move above the 21-day moving average, and even if it rallies, 94 can be a strong hurdle to crack. Until the index trades below 94, the index will be inclined to move southwards. From the current level of 92.88, the nearest supports are at 92.5 and 92.15. As long as the dollar is weak, the rupee bulls are at an advantage.
Trade strategy
The price action of the last couple of trading sessions hints at a sideways trend in INR, where the exchange rate can stay within 74.2 and 74.5. Even today, the local currency has opened flat and remains within the range. Nevertheless, the dollar weakness gives, and upper hand for the rupee. So, traders can initiate fresh rupee longs in decline with stop-loss at 74.5
Supports: 74.35 and 74.5
Resistances: 74.1 and 74
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