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By closing below the critical support of 73.5, the rupee (INR) has turned its short-term outlook bearish against the dollar (USD). The local currency that opened on a flat note yesterday weakened and closed at 73.58. If the rupee continues to depreciate today, the nearest support it can find is at 73.7, below which 74 is a crucial support. But if INR strengthens and rallies above 73.5, it is likely to face hurdles at 73.3 and 73.15.
The Foreign Portfolio Investors (FPI) dumped domestic assets as the market fell on Tuesday. The net outflow was significantly higher at ₹2,072 crore (equity and debt combined). The FPI selling too contributed to the rupee weakness yesterday. If the market remains downward biased, the FPI selling might continue which could weigh on the Indian currency.
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The dollar index closed in the green yesterday, thus gaining for two consecutive sessions – an indication of bullish momentum being built up. It has closed above both 21- and 50-day moving averages and today it has been rallying; it crossed above the key barrier at 94. The price action indicates that the index is likely to gain further, and if it closes above 94 today, the short-term trend could turn bullish. If the dollar advances, it can negatively impact the rupee.
Trade strategy
The rupee, which breached the support of 73.5 yesterday, has turned the outlook bearish. Moreover, the dollar index indicates that the greenback seems to be gaining traction. Considering these factors, traders can sell rupee on rallies with stop-loss at 73.4.
Supports: 73.7 and 74
Resistances: 73.5 and 73.3
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