Technical Analysis

Daily Rupee call: Rupee might weaken today

Akhil Nallamuthu BL Research Bureau | Updated on November 25, 2019

The rupee (INR) seems to be indecisive in its movement against the dollar (USD) as it continues to consolidate within the tight range between 71.7 and 71.9. Thus, the broader range between 71.6 and 72 is still valid and the domestic currency can be expected to trend only if it moves out of the range. As we can observe, the support at 72 remains strong in the weekly chart.

Foreign Exchange Reserves

On Friday, the Reserve Bank of India (RBI) released the weekly statistical supplement containing the foreign reserves data. Total reserves stand at $448.2 billion (new all-time high) compared to the previous week’s $447.8 billion, an increase by $0.4 billion.

While there was an increase in the value of foreign currency assets, the major component of foreign exchange reserves, the value of gold reserves dropped for second consecutive week. The value of foreign currency assets increased to $416.4 billion compared to previous week’s $415.8 billion, an increase by $0.6 billion. Whereas the value of gold reserves decreased to $26.7 billion compared to previous week’s $26.9 billion, a drop by $0.2 billion.

Noticeably, the rate of increase in the total reserves is lower compared to the previous week. However, the current reserve position, which is at all-time high, gives more room for the RBI to manage any unexpected volatility in the exchange rate of USD INR.

US Dollar index

Th dollar index seems to have formed a substantial base around the dynamic support of the 21-day moving average. On Friday, the index bounced sharply and ended the week at 98.17, above the critical resistance of 98. The price action is bullish and the dollar will most likely advance from current levels.

On the upside, the index has a hindrance at 98.25, beyond which the resistance is at 98.5. On the downside, 98 will act a solid support arresting any potential fall.

Trade strategy

The rupee has opened the week on a flat note at 71.7, the upper end of the tight range within which it has been trading for past few sessions; also, the dollar trades with bullish bias. So, one can be cautiously bearish on rupee today and traders can short rupee with stop-loss at 71.5 for intraday.

Supports: 72 and 72.3

Resistances: 71.4 and 71.6

Published on November 25, 2019

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