Technical Analysis

Daily Rupee call: Go long with tight stop loss

Akhil Nallamuthu | Updated on October 21, 2020

BL Research Bureau

On Tuesday, the rupee (INR) settled lower by ten paise at 73.46 versus preceding day’s close of 73.36 against the dollar (USD). But since 73.5 is strong support for the Indian currency, the likelihood of further depreciation looks low, and the bulls could gain ground from the current level.

If INR bounces up from the support of 73.5 and rallies, it will face hindrance at 73.3. A move above that level can lift the local currency to 73.15. But if bears drag the domestic currency below 73.5, the sell-off can intensify. While 73.7 is the immediate support, the exchange rate will most likely move to 74 in case if the support at 73.5 is breached.

The rupee weakened yesterday despite the Foreign Portfolio Investors (FPI) remaining net buyers. Continuing the recent positive sentiment, the FPI made net investments of a significant ₹1,585 crore (equity and debt combined) on Tuesday. That takes the total net inflow in the first two sessions of the week to ₹3,241 crore. If foreign inflows continue at this rate, INR can gain considerable ground against USD in the upcoming sessions.

Dollar index

The price action of the dollar index in the daily chart indicates that the bears are steadily gaining grip as it has registered a loss for three consecutive days. Moreover, today, the index has slipped below the support of 93 and has already marked a four-week low of 92.88. This makes the case stronger for the bears. A fall in the dollar is positive for the Indian currency.

Trade strategy

The rupee opened today’s session at 73.41 as against yesterday’s close of 73.46. Since 73.5 is a strong support, the local currency could see long positions coming in at current levels. Also, the dollar looks weak. Hence, traders can be bullish on INR and buy for intraday with a tight stop-loss.

Supports: 73.5 and 73.7

Resistances: 73.3 and 73.15

Published on October 21, 2020

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