Technical Analysis

Daily rupee call: Tread with caution

Akhil Nallamuthu BL Research Bureau | Updated on August 06, 2020 Published on August 06, 2020

The rupee (INR) is trading with a gain of 12 paise against the dollar (USD) ahead of the announcement on the latest policy decisions by the Reserve Bank of India (RBI). Yesterday, the domestic currency closed with a gain of 11 paise at 74.93 versus the previous close of 75.04.

Today, until the rate decision is announced, the rupee is likely to trade sideways and the volatility can go up substantially post the announcement. If the domestic currency gains and breaches the resistance at 74.7, it can extend the rally to 74.6 and 74.5. But if it weakens below the support at 75, it can witness considerable selling pressure. The support levels can be spotted at 75.15 and 75.3.

There was a lull in the FPI (Foreign Portfolio Investors) action yesterday as the gross purchases and sales were almost equal; the net outflow was a mere ₹60 crore (equity and debt combined). Probably, today’s policy decision can influence the FPI activity in upcoming sessions. Unless there is a significant outflow, INR can be expected to stand above the critical level of 75 versus USD.

Dollar index

The dollar index fell back below the 93-level yesterday and is now hovering around the prior low of 92.55. Since the overall trend is bearish, the possibility of the index forming a new low is high. Fresh round of selling can be expected if it slips below the prior low.

Trade strategy

Though the rupee has begun the session higher, it essentially remains within the range of 74.7 and 75. Importantly, the intraday movement will largely rely on the outcome of the MPC (monetary policy committee) meeting. Traders need to be cautious and wait for a decisive break on either side before initiating fresh positions.

Supports: 74.9 and 75

Resistances: 74.7 and 74.6

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Published on August 06, 2020
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