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The rupee (INR) ended the day lower on Thursday at 71.37 versus its previous close of 71.22 against the dollar (USD). However, the forward spread of USDINR remains at previous day’s level i.e. 304 points. Thus, the exchange rate yesterday closed within the range between 71.2 and 71.4.
However, in today’s session the rupee has opened much lower at 71.61, breaking below the range. This opens the door for further depreciation. Currently trading at 71.55, the immediate support is at 71.6, below which the support is at 71.88. But if it strengthens from current levels, it will face hindrance at 71.4. Resistance above that level is at 71.2.
The dollar rallied yesterday and the dollar index closed the day in the green at 96.85 compared to its previous close of 96.39. On further appreciation, the index will face resistance at 97.2 and 97.75. The resistance at 97.2 is strong as the level coincides with the 21-day moving average. In case if the index declines, the immediate support is at 96.7. Below that level, the support is at 96.
Trade strategy:
As the Indian currency has broken below the range, it can be approached with a bearish bias. But from a trading perspective, the risk-reward ratio is not favourable for short positions at current levels. Thus, traders are recommended to initiate rupee shorts if it rallies to 71.45 and place stop loss at 71.3.
Supports: 71.6 and 71.88
Resistances: 71.4 and 71.2
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