Technical Analysis

Daily Rupee call: INR might post gain today

Akhil Nallamuthu BL Research Bureau | Updated on November 09, 2020 Published on November 09, 2020

Even as the rupee witnessed higher volatility, it ended the past week almost flat -- closing at 74.2, as against preceding week’s close of 74.11 against the dollar (USD). So, the year-to-date loss of INR against USD stands at nearly 4 per cent.

Today, the domestic currency opened with a gap-up at 73.94, thereby crossing over the barrier at 74. The nearest hurdle that the rupee can face is at 73.85. If the positive momentum sustains and INR can breach this level, it might appreciate to 73.7. But if the local currency declines and slip below 74, it could weaken to 74.25. Subsequent support is at 74.5.

For the first week of November, the Foreign Portfolio Investors (FPI) have been positive and were net buyers. So, the net investments across all asset classes for the current month so far stands at ₹8,320 crore. By attracting net inflow of ₹6,564 crore, equity remains the FPI favourite. Going ahead, if the foreign flows are strong like in October, it can boost the demand for the rupee thereby strengthening against the dollar.

Foreign reserves

The total foreign reserves held by the Reserve Bank of India (RBI) stands at $560.7 billion – a record high, shows the latest weekly statistical supplement released by the central bank. Compared to the preceding week, it increased by a marginal $0.2 billion. Foreign Currency Assets (FCA), the largest component of the reserves, was up by $0.8 billion to $518.3 billion. Notably, the value of gold holding came down by $0.6 billion to $36.2 billion. Nevertheless, the total reserve is at record high and large foreign reserves holding is positive for the rupee.

Dollar index

The dollar index lost nearly 2 per cent last week, as it declined from 94.04 to 92.23. The price action on the daily chart looks bearish biased and the likelihood of further decline is high. Today, after opening flat, the index has inched down and is now trading at around 92.15. The nearest support levels from the current level are at 92 and 91.75. Notably, 91.75 is the two year low and so, a breach of this level can intensify the sell-off, possibly dragging the index towards 91 during the upcoming trading sessions.

Trade strategy

The rupee has opened today’s session on the front foot and consequently, it has moved above the important level of 74, which will now act as a support. Since the dollar index indicates weakness, the exchange rate of USDINR could move in favour of the rupee. So, traders can be bullish and buy rupee with a stop-loss at 74.2.

Supports: 74 and 74.25

Resistances: 73.85 and 73.7

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Published on November 09, 2020
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