Technical Analysis

Daily Rupee call: Momentum favouring the rupee

Akhil Nallamuthu BL Research Bureau | Updated on March 01, 2021

The rupee (INR), which was making gradual progress for most part of last week, faced a wave of selling pressure on Friday, resulting in a sharp fall against the dollar (USD).

The rupee (INR), which was making gradual progress for most part of last week, faced a wave of selling pressure on Friday, resulting in a sharp fall against the dollar (USD). Consequently, the local currency ended the week at 73.46 versus previous week’s close of 72.65, posting a weekly loss of 1.1 per cent.

Extending the loss, the rupee opened with a considerable gap-down today at 73.77. Nevertheless, the strength of the bears seem to have diminished at this stage as INR has closed the gap by moving up. If it can appreciate further, it can face hurdles at 73.15 and 73.00. Subsequent resistance is 72.80. On the other hand, if the bears regain traction and start dragging down the rupee again, it can find support at 73.70. Below this level, there is a support in the band between 73.80 and 73.90.

Also read: Daily rupee call: Rupee slips below 73; might end the day with a loss

Even though there was outflows towards the end of February, the net investments of the foreign portfolio investors (FPI) was significantly positive for the month. Compared to January’s ₹14,631 crore, the net inflow in February stood at ₹24,013 crore. Foreign inflows has been a major supportive factor for the rupee and if this trend continues, it can easily regain the lost ground.

The latest Reserve Bank of India (RBI) data shows that the foreign exchange reserves are at healthy levels. Although there is no significant increase as per the latest numbers, at $583.9 billion, the reserves in the RBI’s kitty is large enough to combat any potential volatility in the exchange rate of USDINR.

Dollar index

The dollar index, which was largely flat over the past week, rose steeply on Friday to end the week with a gain of 0.6 per cent. Today, after a minor gap-down open, the index has been inching up gradually and is now trading around 90.80. However, it faces a considerable resistance at 91.00, a breakout of which can attract considerable buying interest. Above 91.00, the resistance is at 91.50. Key supports from the current level are at 90.50 and 90.00.

Trade strategy

The rupee, despite a gap-down open, has been gaining quickly. It has covered up the gap and is now trading around 73.30. The momentum looks to be in favour of the rupee and is likely to appreciate further. Also, the dollar index is facing a hurdle. So, traders can buy rupee for intraday with a tight stop-loss.

Supports: 73.40 and 73.50

Resistances: 73.15 and 73.00

Published on March 01, 2021

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