Technical Analysis

Daily Rupee call: Initiate long only above 71.6 with tight stop-loss

Akhil Nallamuthu BL Research Bureau | Updated on November 18, 2019 Published on November 18, 2019

The rupee (INR) closed at 71.79 against the dollar (USD) last week, recouping some of its losses. On Friday, the Indian currency opened higher at 71.8 versus its previous close at 71.97 and marked an intra-day high at 71.68 and ended the session with a quarter per cent gain.

Recovery henceforth will face resistance at 71.6, and above that level, the exchange rate of USD/INR can be expected to move towards 71.4. On the other hand, a decline from the current level will find strong support at 72.

On Friday, the foreign exchange reserves data released by the RBI showed that that total reserves increased to a new all-time high to $447.8 billion as on November 15, 2019 compared to $446.09 billion as of November 8,2019; an increase by $1.7 billion. While there was an increase in the value of foreign currency assets, the major component of foreign exchange reserves, the value of gold reserves dropped. The value of foreign currency assets increased to $415.8 billion as on November 15,2019 compared to $413.6 billion as on November 8, 2019; an increase by $2.17 billion. Whereas the value of gold reserves decreased to $26.9 billion as on November 15,2019 compared to $27.3 billion as on November 8, 2019; a drop by $0.4 billion. Noticeably, the total foreign exchange continues to rise, which can be a useful tool in managing the sharp movements in the exchange rate.

Trade balance data was released on Friday by the Ministry of Commerce. According to the release, the trade deficit for the month of October 2019 is estimated to be $11.01 billion against the deficit of $18 billion in the corresponding month of the previous year. However, on a sequential basis there was a marginal uptick in deficit for the month of September 2019 it was $10.86 billion. If trade deficit continues to narrow, the domestic currency will benefit, whereas an increase will act as a dampener.

The dollar index has broken below the critical support at 98 and seems to be heading towards next support at 97.67. Below that level, 97.4 is a minor support. Weak dollar condition is favourable for the Indian currency, which already seems to be on recovery after taking support 72. The trend will most likely continue today, and so one can maintain a bullish stance on rupee.

Today, the rupee has opened at 71.76 and is currently trading near the resistance at 71.6. Since it is trading near a resistance, one needs to be cautious even though the momentum is in favour of INR recently. Traders are advocated to wait for a decisive break of 71.6 and initiate rupee longs only above 71.6 with a tight stop-loss.

Supports: 72 and 72.3

Resistances: 71.4 and 71.6

Published on November 18, 2019
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