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The rupee (INR) closed Monday’s session marginally lower -- ended at 73.02 versus previous close of 72.95 against the dollar (USD). Though it has closed below the 73.00-mark, the breach is not decisive. Following this, the domestic currency opened flat and is currently hovering at the important level of 73.00. Price action over the past week shows that the exchange rate of USDINR has been oscillating in the band between 72.80 and 73.15.
Currently trading near the middle of the range, the probabilities of the exchange rate moving to 72.80 and 73.15 are equal. Immediately above 72.80 lies the resistance of 72.70 for the rupee with subsequent hurdle at 72.50. Whereas, below 73.15, the support levels are 73.25 and 73.40.
The equity market witnessed a sharp rally post presentation of the Union budget last session and the foreign portfolio investors (FPIs) participated in the rally by making a net investment of nearly ₹1,500 crore. Since the event is now behind us, the market might remain positive at least in the near future and this can lead to higher foreign inflows. In that case, it is positive scenario for the rupee where it can gain ground against the dollar.
Dollar index
The dollar index rallied last session and closed at 90.98, falling short of breaching the key resistance at 91.00. But it has moved past the 50-day moving average, giving it a positive bias. An inverted head and shoulders pattern – a bullish reversal pattern – can be observed on the daily chart with its neck level at 91.00. Against this backdrop, if the index manages to crack the resistance at 91.00, the short-term trend can turn positive. It can be expected to rally to 91.50 and 92.00 which can weigh on the Indian currency.
Trade strategy
The rupee, now fluctuating within the range of 72.80 and 73.15 is hovering at the 73.00 level. Unless, either of these levels are breached, the direction will not be clear. So, until then, traders can adopt range trading strategy.
Supports: 73.15 and 73.25
Resistances: 72.80 and 72.70
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