Technical Analysis

Daily rupee call: Rupee likely to post gains

Akhil Nallamuthu | Updated on June 08, 2020

Last week, the rupee (INR) ended flat at 75.57 compared to the preceding week’s close of 75.61 against the dollar (USD). Thus, the local currency is holding the range between 75 and 75.6 within which it has been oscillating since the beginning of this month.

Currently hovering around 75.6, the rupee might appreciate taking support at 75.6. On the upside, it will face hindrance at 75.3 and 75.15. But in case the domestic unit slips below 75.6, it can attract considerable selling interest. Potential support levels are 75.8 and 76.

According to the latest data of the National Securities Depository Ltd (NSDL), Foreign Portfolio Investors (FPI) were on a buying spree last week. For the current month, FPI net inflows stand at Rs 18,613 crore (equity and debt combined). This is a big positive for the INR and more inflows can lift the local currency against the USD.

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India last Friday showed that foreign reserves rose between May 22 and May 29. According to the report, the total reserves increased by $3.4 billion i.e. it increased to $493.4 billion from $490 billion. Foreign Currency Assets (FCA), the largest component of reserves, increased by about $3.5 billion to $455.2 billion from $451.7 billion. The value of gold holding was largely unchanged at $32.7 billion compared to the preceding week. A huge holding of foreign reserves is a good tool if the rupee witnesses higher volatility.

Dollar index

With the dollar index losing 1.5 per cent last week, it has closed in the red for three straight weeks. The price action indicates good bearish momentum and the index will most likely fall further. Currently trading at 96.9, it has support levels at 96.4 and 96.

Trade strategy

The rupee, trading near 75.6, might take support at this level and go up. The risk-reward ratio is favourable for rupee long positions. So, for intraday, traders can buy INR with tight stop-loss.

Supports: 75.6 and 75.8

Resistances: 75.3 and 75.15

Published on June 08, 2020

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