Technical Analysis

Daily Rupee call: INR slips below the key support of 74

Akhil Nallamuthu | Updated on October 29, 2020

BL Research Bureau

Faced with resistance at 73.7, the rupee (INR) depreciated on Wednesday and registered a loss of 16 paise against the dollar (USD). The domestic currency has been making lower highs and lower lows for the past couple of weeks.

Aligning with the prevailing bearish bias, INR has opened with a gap-down today where it has slipped below the key support of 74. Thus, the price action is in favour of rupee bears, and the exchange rate of USDINR is likely to move towards 74.2. A breach of this level can drag the local currency to 74.4. But in case if bulls regain traction and take the rupee above 74, it can face a hurdle at 73.85. Above that level, it can rally to 73.7.

The Foreign Portfolio Investors (FPIs) remained sellers yesterday as the market sentiment was negative. The net outflow stood at about ₹1,131 crore (equity and debt combined). Further fall in the broader market can result in further FPI sell-off weighing on the Indian currency.

Dollar index

The dollar index, which was sluggish since the past week, posted gain yesterday. As a result, it rallied past the both 21- and 50-day moving averages and closed above the resistance of 93 as well. Currently trading at 93.4, the index is likely to advance to 94 – a critical resistance. A breakout of this level can turn the trend in favour of the greenback. Until then, the dollar bulls should be cautious.

Trade strategy

The rupee, which has been declining gradually over the past few trading sessions, has breached the support of 74. This has opened the door for further weakening. Also, the dollar index hints at a possible appreciation in dollar, at least for intraday. Given these factors, traders can be bearish on the rupee and initiate fresh short positions on intraday rallies with stop-loss at 73.8.

Supports: 74.2 and 74.4

Resistances: 74 and 73.85

Published on October 29, 2020

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