Technical Analysis

Initiate long in rupee with tight stop-loss

Akhil Nallamuthu | Updated on August 07, 2020 Published on August 07, 2020

The rupee (INR) ended flat at 74.93 on Thursday against the dollar (USD) following the monetary policy announcement by the Reserve Bank of India (RBI). While not cutting rates is a positive for the Indian currency, higher inflation outlook does not bode well.

Today, INR has opened with gap-down open at 75.05. If it sustains below this level, the exchange rate might move towards 75.1 and 75.3, which are the nearest support levels. On the other hand, if the local currency rebounds above 75, it can face hindrance at 74.8 and 74.7.

The FPI (Foreign Portfolio Investors) were net buyers yesterday as they bought domestic assets worth ₹637 crore (equity and debt combined). Though the amount is not very significant, consistent inflows can support the rupee.

Dollar index

The dollar index registered a fresh low of 92.53 yesterday; however, the downtrend lack momentum and it was largely flat throughout yesterday’s session. Moreover, the price action in the daily chart indicates that the index is possibility entering a consolidation phase between the low of 92.53 and 94. But the overall trend in bearish and a decisive break below the low can attract selling interest.

Trade strategy

The rupee has opened below the important level of 75. But it has now filled the gap, indicating that the bears lack momentum. Notably, as INR treads near 75, the risk-reward ratio is favourable for rupee long positions. So, traders can buy INR with a tight stop-loss.

Supports: 75.1 and 75.3

Resistances: 74.8 and 74.7

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Published on August 07, 2020
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