The overall bearish sentiment pulled down the rupee (INR) on Thursday as it closed lower at 71.49 versus its previous close of 71.25 against the dollar (USD). Though the Indian currency weakened, its downtrend was arrested by the support band between 71.5 and 71.6, from where it recouped some of its losses.

The 23.6 per cent Fibonacci retracement level of the downtrend is at 71.4, which can act as a resistance. Hence, unless the rupee breaches either 71.4 or 71.6, it cannot be expected to trend in any direction.

However, the relative strength index is showing signs of a trend reversal, which suggests the local currency could appreciate. The resistance above 71.4 is at 71.2, where the 50 per cent Fibonacci retracement of the bear trend lies, while the support below 71.6 is at 71.85.

Dollar index

After briefly trading above 98, the dollar index has retraced below that level. The index might be up for a correction and it might decline towards support at 97.7, below which 97.5 will act as a support. In case it resumes the uptrend and rallies past 98, the resistance is at 98.45.

Trade strategy

Though the rupee is treading within two key levels at 71.4 and 71.6, there are signs of trend reversal. Hence, traders are advised two ways by which the currency pair can be approached from a trading perspective.

That is, either buy rupee when it falls to 71.5 with stop-loss at 71.7, or buy the rupee when it breaches resistance at 71.4 and place stop-loss at 71.6.

 

Supports: 71.5 and 71.6

Resistances: 71.4 and 71.2

 

Related Topics
comment COMMENT NOW