Technical Analysis

Daily Rupee call: INR rallies past 74; likely to be bullish

Akhil Nallamuthu BL Research Bureau | Updated on December 01, 2020

The rupee (INR) last week ended marginally higher at 74.04 versus its preceding week’s close of 74.14 against the dollar (USD). Nevertheless, it remained below the key level of 74. Today, the local currency opened higher at 73.94 and rallied to 73.6, thereby already gaining 0.6 per cent so far today.

While INR can face resistance at 73.5, a breakout of this level can lift the domestic unit to 73.3. Subsequently, it can appreciate to 73.15 if the positive momentum sustains. In case of the rupee fails to advance and drops from the current level of 73.6, it can find an immediate support at 73.7. Below that level 73.85 can be a good base.

The foreign inflows continue to be significant i.e. the Foreign Portfolio Investors’ (FPI) net investments in November stood at ₹62,782 crore as per the National Securities Depository Limited (NSDL) data. This is an increase of ₹13,356 over the past week alone. The equity segment remained the most attractive as the net inflow last month was registered at ₹60,358 crore. The considerable inflow has helped the rupee stay afloat against the dollar and if this trend continues, the local currency can witness considerable appreciation from the current levels.

Foreign reserves

The total foreign reserves held by the Reserve Bank of India (RBI) increased by $2.5 billion to $575.3 billion, according to the latest weekly statistical supplement released by the Central Bank. Foreign Currency Assets (FCA), the largest component of the reserves, was up by $2.8 billion to $533.1 billion. However, the value of gold holding came down by $0.3 billion to $36 billion. Nevertheless, the total reserves is at record highs and large foreign reserves holding is positive for the rupee.

Dollar index

The dollar index declined 0.6 per cent last week as it ended at 91.9 on Friday versus previous week’s close of 92.4. Thus, it has slipped below the key support of 92. Notably, it registered a low of 91.5 last week, which is the lowest point in more than two years. Today, the index opened flat and inched down to 91.8. While 91.75 can be the nearest support, the index is likely to breach this level and move down to 91.5. Support below that level is 91.

Trade strategy

The rupee, after opening with a marginal gap-up, is showing substantial positive momentum. Moreover, the dollar index is showing that the dollar is trading weak. Hence, traders can be bullish on the rupee today and go long in declines with stop-loss at 73.85.

Supports: 73.7 and 73.85

Resistances: 73.5 and 73.3

Published on December 01, 2020

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