Technical Analysis

Daily Rupee call: Rupee facing a barrier at 73

Akhil Nallamuthu | Updated on September 07, 2020

Last week, the rupee (INR) settled at 73.14 versus the preceding week’s close of 73.4, thereby gaining 26 paise against the dollar (USD). Thus, the rupee has closed in the green for two weeks in a row – a positive indication.

Today, INR opened on a flat note at 73.16. It has a minor resistance at 73.15, but a move above that level can take the local currency to 73. A decisive breakout of 73 can result in a sharp rally. On the other hand, if the rupee weakens from the current level, it has a support band between 73.4 and 73.5. Subsequent support is at 73.73.

Foreign Portfolio Investors (FPI) have been buyers for the month with net inflow of ₹1,589 crore, according to data by National Securities Depositories Ltd (NSDL). But it was largely due to the net investments of ₹2,489 crore in the ‘hybrid’ category that includes REITs (Real Estate Investment Trust) and InvITs (Infrastructure Investment Trust). Notably, the equity and debt segments have together witnessed net outflow of ₹844 crore so far in September. So long as the funds continue to come in, it could be good for the Indian currency.

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday shows that total foreign reserves hit a new high of $541.1 billion as on August 28 i.e. it has increased by $3.9 billion between August 21 and 28. Foreign Currency Assets (FCA), the largest component of reserves, too was up by $3.9 billion at $498 billion from $494.1 billion during the corresponding previous period. However, the value of gold holdings was largely at the same level of $37.2 billion. The RBI continues to increase foreign reserves by using foreign inflows and this can be used in effectively stabilising the USDINR exchange rate.

Dollar index

The dollar index ended last week at 92.72 versus its previous close of 92.37. However, there is no change in the downtrend as it struggles to rally above the 21-day moving average. Also, 94 is a noticeable resistance and unless this level is breached, the intermittent rallies might not be sustainable. Currently trading at 92.9, the nearest support is at 92.5 and 92.15.

Trade strategy

The rupee, after beginning the day on a flat note, is currently trading at 73.07 with a bullish bias. However, 73 can be a strong resistance for the bulls. So, go long in INR only if it breaks out of 73.

Supports: 73.4 and 73.5

Resistances: 73 and 72.75

Published on September 07, 2020

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