Technical Analysis

Daily rupee call: Stay cautious as INR could trade in volatile territory today

Akhil Nallamuthu | Updated on December 04, 2020 Published on December 04, 2020

Time to get bolder on lending

The rupee (INR) closed with a marginal loss at 73.93 against the dollar (USD) on Thursday. Though it slipped below the support of 73.85, it managed to hold above the critical support of 74. Today, the rupee opened with a gap-up at 73.81 and following the RBI’s statement on the repo rate, it has not changed much as the decision was in line with expectations.

If the rupee strengthens from the current level, it could face a hurdle at 73.70. A breach of this level can take INR to 73.50. But if the domestic currency weakens from here, it could find support at 73.85 and 74. A break below 74 can intensify the sell-off and so, this is an important level for rupee bulls.

Even though the market declined after a gap-up open yesterday, Foreign Portfolio Investors (FPI) were net buyers on Thursday. Their net investments stood at ₹3,637 crore. But despite this, the rupee closed with a loss yesterday. However, 74 is a strong base, which can arrest the decline.

Dollar index

Extending the downtrend, the dollar index posted a loss of nearly half a per cent as it ended the last session at 90.71. It marked a fresh low of 90.51 in the last session – the lowest point in more than two years. The bears look strong and the index can be expected to depreciate further from the current level and drop to 90 – a considerable support. Below this level, it can fall to 89.5. The weakness in dollar, as indicated by the dollar index, can lift the Indian currency.

Trade strategy

The rupee has begun today’s session on the front foot by opening with a gap-up. It also lies above the crucial support of 74. The dollar index continued to weaken and the outlook for the greenback is bearish. These factors are positive for INR. However, traders should tread with caution since the currency pair USDINR can witness higher volatility today because of the monetary policy announcement.

Supports: 74 and 74.25

Resistances: 73.70 and 73.50

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Published on December 04, 2020
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