Technical Analysis

Daily rupee call: Initiate rupee longs

Akhil Nallamuthu | Updated on August 12, 2020 Published on August 12, 2020

The rupee (INR), after gaining 12 paise in Tuesday’s session, opened flat today at 74.77 against the dollar (USD). Evidently, the currency pair remains within the range between 74.7 and 75.

If INR is able to extend Tuesday’s positive momentum today, it is likely to face a hurdle at 74.7. A breakout of this level can attract considerable buying interest, potentially taking the exchange rate to 74.5. On the other hand, if the local currency depreciates from the current level, it will find support at 74.9 and 75.

Foreign Portfolio Investors (FPI) seem to be positive as they pumped in money on Tuesday as well. Their net inflows stood at ₹1,013 crore (equity and debt combined) and thus the net inflow for the week is now a little over ₹1,300 crore. If this trend continues for the rest of the week, the local currency might be able to crack the resistance at 74.7.

Industrial production

The Index of Industrial Production (IIP) declined for a fourth straight month, contracting by 16.6 per cent in June. The only solace is that the level of contraction has come down from 33.9 per cent in May. In the June quarter, it shrunk by nearly 36 per cent. It is expected to improve in the subsequent months as lockdown measures are lifted gradually.

Dollar index

The dollar index, though on a lower scale, closed in the green for three straight sessions, having gained marginally on Tuesday. However, it remains within the range of 93.5 and 94. At 94, the 21-day moving average coincides, making it a considerable resistance. Currently trading at 93.8, the index should decisively break out of 94 to turn the outlook positive. Until then, the bears will have an equal chance.

Trade strategy

The rupee is currently trading around 74.85 and its nearest support is at 74.9. Also, the domestic unit seems to be biased towards the upside. Given that, traders can initiate fresh rupee longs on declines, with stop-loss at 75.

Supports: 74.9 and 75

Resistances: 74.7 and 74.5

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Published on August 12, 2020
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