Daily rupee call: Go short on rupee with stop-loss at 70.7

The rupee (INR) has breached the consolidation range between 70.7 and 71 against the dollar (USD). Last Friday, it closed at 71.08, opening the door for further weakness. It has also broken below the 23.6 per cent Fibonacci retracement level of the previous bull trend. Notably, the one-year forward spread of the USDINR currency pair has stabilised around 300 points.

On a further decline, the Indian currency will find support at 71.2, with subsequent support at 71.4 coinciding with the 50 per cent Fibonacci retracement of the previous upswing. But if the rupee regains bullish momentum, it will face a hurdle at 71, above which the resistance is at 70.7.

Foreign reserves

The Indian foreign reserves have remained largely unchanged during the past week. The weekly statistical supplement released by the RBI on Friday showed that the total foreign reserves stood at $461.21 billion compared to the previous week’s $461.15 billion, an increase of a meagre $58 million. While the Foreign Currency Assets (FCA), the largest component of the reserves, dropped marginally by $0.37 billion to $427.58 billion from $427.95 billion, gold reserves went up slightly by $0.44 billion to $28.49 billion from $28.05 billion during the past one week.

Dollar index

The dollar surged on Friday and as a result, the dollar index rallied past the 50-day moving average. Thus, it has also breached resistance at 97.5. The index will most likely advance towards the resistance band between 97.8 and 98. In case of a decline, the index can fall to the support at 97.2, the 21-day moving average.

Trade strategy

The rupee opened the week at 71.07, compared to the previous week’s close of 71.08. Since the rupee has breached the critical support at 71, traders can take a bearish for intraday. Short rupee on intraday rallies, with stop-loss at 70.7.

Supports: 71.2 and 71.4

Resistances: 71 and 70.7