Technical Analysis

Daily Rupee call: INR likely to face downward pressure

Akhil Nallamuthu | Updated on December 15, 2020

BL Research Bureau

While the rupee (INR) is trading within the price band 73.50 and 73.85, the local currency attempted to rally past the resistance at 73.50 last session. That is, it registered an intraday high of 73.47, but it gave up the gains and ended the session at 73.57. Thus, the consolidation range remains valid, and as long as the local currency continues to tread between these levels, the direction of the next swing in price will be uncertain.

If the rupee gains and moves upwards of 73.50, it can appreciate to 73.15. Subsequently, it can advance to 73. But if the local currency weakens, it can move towards 73.70. Below that level, it can test the lower limit of the range, i.e. 73.85.

The foreign inflows remain unshaken as the foreign portfolio investors (FPI) made net investments of ₹2,264 crore (equity and debt combined) on Monday. As long as this trend is steady, the rupee can remain firm against the greenback.

Inflation weighing

Both inflation data, i.e. the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) released last session shows they remain at higher levels.

While CPI did slip below 7 per cent after two months, at 6.93 per cent in November, it is still above the Reserve Bank of India (RBI) targeted levels. CPI, in October, stood at 7.61 per cent. This was kept higher mainly by food items, i.e. the Consumer Food Price Index (CFPI) stood at 9.43 per cent in November. Nevertheless, it is lower than 11 per cent registered in October.

WPI has been going up sequentially in the past few months, and it stood at 1.55 per cent in November. It was recorded at 1.48 per cent in the preceding month.

Higher inflation is always negative for the currency and higher CPI and WPI numbers can weigh on the rupee and can keep the upside, powered by foreign inflows, limited.

Dollar index

Though the dollar index posted a loss last session, it continued to remain within the price band of 90.50 and 91.20. So, despite the overall trend being bearish, it cannot be expected to trend unless it moves out of this range. Nearest support below 90.50 is at 90, where the immediate resistance above 91.20 can be seen at 91.50 – its 21-day moving average.

Trade strategy

The rupee has opened today’s session with a minor gap-down, and the inflation numbers can further weigh it down. . Also, the Indian market is witnessing downward pressure since morning, and this can influence INR as well. So, traders can take a bearish view on the rupee today. Moreover, currently trading around 73.60, the risk-reward ratio too is favourable to rupee short positions. Hence, short INR for intraday with tight stop-loss.

Supports: 73.70 and 73.85

Resistances: 73.50 and 73.15

Published on December 15, 2020

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