Technical Analysis

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

Akhil Nallamuthu | Updated on February 26, 2021

Deficit levels must be guided back to levels consistent with debt sustainability

Faced with stiff resistance at 72.30, the rupee (INR) depreciated against the dollar (USD) in the last session and ended the day lower by 10 paise. The local currency, which opened on a flat note at 72.30 in the last session, saw a considerable sell-off wherein it marked an intra-day low of 72.52 before closing the session at 72.42 versus 72.32 – its Wednesday close.

Following this, the local currency has opened significantly weaker today i.e., it has opened with a gap-down at 73.06, about 0.8 per cent lower compared to its previous close. Since the rupee has now slipped below the support of 73.00, bears might look to seize this opportunity to drag it down further. Immediate support from the current levels are at 73.15 and 73.30. On the other hand, if the local currency moves up recouping its losses, it is likely to face hurdles in the form of resistance in the band between 72.90 and 72.80.

Even as the market ended on a positive note yesterday, interest from foreign portfolio investors (FPI) was subdued yesterday. That is, net investments on Thursday stood at ₹188 crore, which is a very low amount compared to the recent trend. If the foreign inflows decrease, the rupee might lose one of its significant supports and might start losing considerable ground against the dollar.

Dollar index

The dollar index witnessed a volatile session yesterday. After declining and marking an intraday low of 89.68, the index recovered and closed above the key support of 90.00, showing that there is a good volume of buying at lower levels. It has opened on the strong foot today and is now trading around 90.40, where the 50-day moving average coincides. If this level is breached, we can expect a rally, where the dollar index could appreciate to 91.00 – a resistance level. Subsequent resistance is at 91.50.

Trade strategy

Though the rupee has opened with a gap-down and has slipped below the key level of 73.00 and is trading lower by about 0.9 per cent as against yesterday’s close, it has already made a significant move for the day. Given the circumstances, despite the rupee looking bearish, rather than initiating fresh shorts at current levels, traders can wait for an intraday corrective rally to go short. Maintain a tight stop-loss.

Supports: 73.15 and 73.30

Resistances: 72.90 and 72.80

Published on February 26, 2021

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