BL Research Bureau

Breaching the support of 73.5, the rupee (INR) depreciated yesterday and closed 12 paise lower at 73.58 versus its previous close of 73.46. This has turned the outlook negative for the local currency.

The rupee has begun today’s session significantly lower at 73.77, slipping below the support of 73.7 thereby making the case stronger for the bears. The nearest support below 73.7 can be seen at 74. On the other hand, if the domestic unit appreciates from here, 73.5 can act as a hurdle. Beyond this level, 73.3 can be the resistance.

Despite a volatile market last session, the market managed to close in the green and the Foreign Portfolio Investors (FPIs) made significant amount of investments. The net inflow on Wednesday stood at ₹2,108 crore (equity and debt combined). With this, the net investments for the week has gone up to nearly ₹5,350 crore. The rupee declined yesterday despite considerable FPI inflows. But if the inflows continue, the rupee can garner strength and rally.

Dollar index

The dollar index has closed in the red for four consecutive days as it posted a loss yesterday, indicating a considerable bearish momentum. It has formed lower low in the daily chart and it marked a four-week low of 92.47 last session before closing the session at 92.72. The trend is clearly bearish and the weakness in dollar is likely to continue which will drag the index lower. This can help the rupee to gain ground against the greenback.

Trade strategy

The rupee has opened with a gap-down and is testing the support of 73.7 level. But the price action is unfavourable to the India currency. On the other hand, the dollar too looks weak as indicated by the dollar index. This can lead to a tug of war between bulls and bears in the currency pair USDINR leading to a sideways trend.

Supports: 73.7 and 74

Resistances: 73.5 and 73.3

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