Technical Analysis

Daily Rupee call: Initiate rupee longs above 74.7

Akhil Nallamuthu BL Research Bureau | Updated on August 19, 2020

The rupee (INR) ended at 74.76 yesterday, that is 12 paise higher against the dollar (USD). Today, it opened at 74.69. On the back of the prevailing bullish bias, if the local currency sustains above 74.7, it is likely to appreciate to 74.5 and then possibly to 74.35. But if INR retracts below that level, it might gradually decline towards the support band between 74.9 and 75. Although, the price action hints advantage for rupee.

This is substantiated by the positive trend in the Foreign Portfolio Investors (FPI) fund flow. The inflows have been considerably positive for the month and following this trend, the net inflow on Tuesday stood at about ₹1,135 crore (equity and debt combined). That means, FPIs have pumped in nearly ₹1,500 in the first two sessions of the current week. The fund flow is expected to be positive and it can aid rupee to strengthen.

Dollar index

The dollar index, that was consolidating within 92.5 and 94 since the beginning of August, closed below the lower limit of the range yesterday. As the major trend is bearish, the fresh break below 92.5 has opened the door for further depreciation. On Tuesday, it marked fresh two-year low 92.13 before closing at 92.2. Currently trading at 92.35, the index is likely to decline to 92. Subsequent support levels are 91.7 and 91.3. Weakening dollar is good for the Indian currency.

Trade strategy

The rupee opened higher today and is currently testing a key resistance of 74.7. A breakout can result in a sharp rally in rupee. Given that, traders can initiate fresh rupee longs with tight stop-loss if it decisively breaches the hurdle of 74.7

Supports: 74.9 and 75

Resistances: 74.7 and 74.5

Published on August 19, 2020

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