Technical Analysis

INR likely to be bearish

Akhil Nallamuthu BL Research Bureau | Updated on July 14, 2020 Published on July 14, 2020

The Indian rupee (INR) that ended the session flat on Monday, opened lower at 75.34 today against the dollar (USD). After registering an intraday low of 75.36, it is currently hovering around 75.3; the local currency is most likely to be bearish for the day.

The nearest support from the current level is at 75.4; if the INR breaches this support, it could decline to 75.6. But if the domestic currency recovers, it will face resistance at 75.15. Above that level, 75 can be a significant roadblock.

There was not much activity from foreign portfolio investors (FPI) on Monday. Though they were buyers, the amount was not very significant. The net inflow stood at a little over ₹220 crore (equity and debt combined). If the magnitude of inflow increases in the coming days, it can help the rupee firm up against the dollar.

Inflation

The Consumer Price Index (CPI) data released on Monday shows that the headline inflation for June stood at 6.09 per cent. While the data was not released for May, inflation was recorded at 5.84 per cent in April. Though the CPI in June looks a tad higher, the consumer food price index has dropped to 7.87 per cent from 9.2 per cent a month ago. Higher inflation could prove to be a challenge for the Reserve Bank of India (RBI) to cut the repo rate.

Dollar index

The dollar index, that saw a marginal decline on Monday, closed above the support of 96.25 after making an intraday low of 96.27. However, a recovery from the current level could face hindrance at 97, which coincides with the 21-day moving average. The next leg of the trend can be confirmed when the index breaches either 96.25 or 97. Until then, it can remain sluggish.

Trade strategy

After opening with a gap-down, the rupee is trading around 75.3. The Indian currency is likely to weaken, and so, traders can short the rupee with stop-loss at 75.15

Supports: 75.4 and 75.6

Resistances: 75.15 and 75

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Published on July 14, 2020
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