The Indian rupee (INR), after opening with a gap-up on Wednesday, was unable to extend the rally against the US dollar (USD) and ended the day flat at 74.76. Today as well it opened higher at 74.64. But the price action of the last couple of sessions indicate that the local currency is struggling to extend the gain beyond 74.6 and that opens up the possibility of a correction.
If the rupee weakens from the current level, it has an immediate support at 74.8. Below that level is the crucial support of 75. A breach of this level can turn the near-term trend bearish. On the other hand, if the local currency regains momentum and appreciates, 74.5 can be a considerable hurdle. A break out of this level can take the INR to 74.35.
Foreign portfolio investors’ (FPI) actions during the week have been in favour of the domestic currency. The net inflow on Wednesday amounted to ₹1,665 crore (equity and debt combined), thereby taking the tally for the week to nearly ₹5,670 crore. Continued inflow of money can boost the rupee.
Dollar index
The dollar index continues to be weak as it declined yesterday as well. Today, it has been hovering around the important support of 95. On the downside, the one-year low of 94.65 is a very crucial support. If this level is breached, the sell-off can intensify and the index might see another leg of downtrend. But a bounce from the current level can take it to 95.15 and 95.75.
Trade strategy
The rupee, after beginning the session higher, has been moderating. Also, the current price action does not favour bulls. So, intraday, traders can short the INR with stop-loss at 74.5.
Supports: 74.8 and 75
Resistances: 74.5 and 74.35
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