Technical Analysis

Daily Rupee call: INR bearish below 76

Akhil Nallamuthu | Updated on June 15, 2020 Published on June 15, 2020

BL Research Bureau

The rupee (INR), which ended last week with a loss of 0.3 per cent against the dollar (USD), has opened on the back-foot today. The local currency has begun today’s session at 75.94 versus last week’s close of 75.84. It is now hovering around the vital level of 76.

On the back of the support at 76, if the domestic unit appreciates from current levels, it is likely to face hindrance at 75.8 and 75.6. But if it breaches the support at 76, it might witness substantial selling pressure. Support levels below 76 are at 76.3 and 76.5.

Even as the rupee weakened, the Foreign Portfolio Investors (FPI) have been buying in the last week, where the net buying has increased by a little over ₹2,000 crore (equity and debt combined). As per the latest data by the National Securities Depository Limited (NSDL) the net inflow for the current month stands at ₹20,621 crore. The bump up in the foreign reserves could partly explain the rupee decline despite considerable buying by the FPIs.

Foreign reserves:

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday showed that the external reserves rose to its highest level in the period between May 29 and June 5. As per the report, the total reserves increased by $8.2 billion, i.e. it increased to $501.7 billion from $493.5 billion. Foreign Currency Assets (FCA), the largest component of the reserves, increased by about $8.4 billion to $463.6 billion from $455.2 billion. The value of gold holding came down by $0.3 billion to $32.3 billion compared to the preceding week. The foreign reserves, at a lifetime high, went past the $500 billion mark. Thus, the RBI has ample reserves in hand to combat volatility arising out of uncertainty.

Dollar index:

The dollar index, which declined in the first half of the week, recovered sharply towards the end, posting a weekly gain of 0.4 per cent. It bounced after taking support at 96 and ended the week at 97.32 versus its previous close of 96.94. Further rally is likely to face stiff resistance between 97.75 and 98.

Trade strategy:

Even though the price action suggests bearish inclination for the rupee, it has strong support at 76, which might arrest decline below that level. Hence, for intraday, traders can short rupee with tight stop-loss if it slips below 76.

Supports: 76.3 and 76.5

Resistances: 75.8 and 75.6

Published on June 15, 2020
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