Technical Analysis

Initiate rupee longs with stop-loss at 72.1

Akhil Nallamuthu BL Research Bureau | Updated on January 07, 2020

The rupee (INR), on Monday, opened lower against the dollar (USD) and faced downward pressure initially. But after making a low of 72.11, the Indian currency started to gain and closed the session at 71.94, above the support at 72. Until rupee manages to hold on to that level, further depreciation is less likely.

Considering that rupee will rally on the back of the support band between 71.88 and 72, the first hurdle it will face is at 71.6, above which the resistance is at 71.4. But if the rupee faces selling pressure and slips below 72, it can decline to 72.25. Importantly, it can be observed in the daily chart that the exchange rate of USDINR has been oscillating between 70.5 and 72.25 since September last year.

Dollar index:

The dollar index seems to be consolidating within 96.4 and 97.1 for the past few days. The index failed to breach 97.1 twice within a week, indicating a selling pressure. But on the downside, it is supported by 96.4. As the index treads a sideways path, it is expected to have a muted effect on the rupee.

Trade strategy:

The rupee has recovered from the support of 72 and as long as it trades above that level, it can be viewed with bullish inclination. Also, the one-year forward spread has not increased and remained at 302 levels, even when rupee temporarily traded below the support at 72. Thus, the dollar demand in the forward market looks subdued – a positive implication for the domestic currency.

Hence, for intraday, traders can initiate fresh rupee long positions on declines with stop-loss at 72.1

Supports: 72 and 72.25

Resistances: 71.6 and 71.4

Published on January 07, 2020

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