Continuing the downtrend, the rupee (INR) weakened on Monday against the dollar (USD). The domestic currency closed below an important support of 71.4, thus breaching the 50 per cent Fibonacci retracement level of previous uptrend – a bearish indication. The one-year forward spread continue to stay around 300 points, indicating stable forward market.
Further decline can take the rupee to the nearest support, spotted at 71.6. Below that level, the support is at 71.85. But if the local currency reverses trend, 71.4 will act as a considerable hindrance. Subsequent resistance is at 71.2
The dollar index continues to exhibit bullish bias. However, the index has reached the critical resistance of 98. If it manages to breakout, the immediate resistance is at 98.45. But if it declines, 97.7 will act as a good support.
Trade strategy:
The Indian currency continues to show weakness as it has broken another support at 71.4, opening the door for further weakness. Moreover, the dollar index seems to firm up. Thus, one can take bearish view on rupee and short on rallies with stop-loss at 71.2
Supports: 71.6 and 71.85
Resistances: 71.4 and 71.24