Technical Analysis

Daily Rupee call: INR expected to descend

Akhil Nallamuthu | Updated on May 04, 2020 Published on May 04, 2020

BL Research Bureau

For the week, the rupee (INR) has opened with a substantial gap-down, at 75.71 versus previous week’s close of 75.1 against the dollar (USD).

Last week, the Indian currency gained by about 1.8 per cent and closed the week at 75.1, after registering an intraweek high of 74.93 on Friday; preceding week’s closing price was 76.45. The local currency had been gaining throughout the week. Nevertheless, 75 is key resistance, and the rupee should breach that level to establish a short-term uptrend. But the chances stand reduced as the domestic unit has begun this week on a weaker note and the bulls seem to have an uphill task.

After some respite for a few days, the Foreign Portfolio Investments (FPI) seems to have resumed selling Indian assets. As per the data of National Securities Depository Limited (NSDL), though the amount is lower in comparison to the month of March, the FPI net outflow in April was at ₹14,859 crore (equity and debt combined). Going ahead, if this trend continues, the rupee might give up the gains it shored up last week and might even weaken more. So, it is imperative for the local currency that the FPI becomes net buyers of Indian assets.

Foreign reserves:

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday shows that there has not been much change concerning the total foreign reserves (between April 24 and May 1) held by the central bank. As per the report, the total reserves at around $479.5 billion barely changed during the mentioned period.

Foreign Currency Assets (FCA), the largest component of the reserves marginally dropped to $441.5 billion compared to $441.8 billion whereas gold holdings slightly increased to $32.9 billion compared to previous week’s $32.7 billion.

Dollar index:

On a weekly basis, the dollar index lost 1.3 per cent last week as it ended the week at 99.08 i.e. below the important level of 100. However, it stays within the range between 98.8 and 100.9, and until it oscillates within these levels, the next leg of the trend will be uncertain. Today, the index has opened slightly higher and is currently trading at 99.4.

Trade strategy:

The rupee has opened lower, and it is currently trading at 75.75, where it has slipped below the support at 75.6. As the overall market sentiment today seems to have taken a hit, a further drop in rupee cannot be ruled out. But as the currency pair has already moved considerably today, one should be prudent with the risk management and stick to strict stop-loss.

As long as the Indian unit trades below 75.6, one can take intraday bearish stand and sell rupee with stop-loss at 75.5

Supports: 75.9 and 76

Resistances: 75.6 and 75.2

Published on May 04, 2020

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