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Opening on a weaker note, the rupee (INR) is moving towards the support band between 75.9 and 76 against the dollar (USD). Until the domestic currency stays above that level, the likelihood of further decline will be low. But on the upside, 75.6 has been acting as a considerable resistance, and the rupee must breach this level to establish a rally.
On Tuesday, after opening higher, the local currency gave up the gains during the first half of the session. However, the downside was arrested at 75.73, from where is firmed up a little, ending the session slightly higher at 75.63; prior close was at 75.71.
Yesterday, the rupee managed to shield itself from the effect of Foreign Portfolio Investments (FPI) selling. The net outflow of FPI was nearly ₹1,060 crore (equity and debt combined). But it can be increasingly difficult for the rupee to hold on if more selling is witnessed.
Dollar index:
The dollar index has been rallying for the past two sessions and is currently trading at 99.8. But it remains within the consolidation range between 98.8 and 100.9. So, the index needs to break out beyond 100.9 to establish a firm uptrend.
Trade strategy:
The rupee has been moving in a sideways trend for the past few trading sessions, and unless it breaches either 75.6 or 76, the next leg of trend cannot be confirmed. So, traders can stay on the fence until then.
Supports: 75.9 and 76
Resistances: 75.6 and 75.2
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