Technical Analysis

Weekly Rupee Review: Rupee can weaken further

Akhil Nallamuthu | Updated on: Jan 18, 2022

Traders can maintain bearish bias

As the dollar has been recovering, the rupee, which was on a strong rally, started to descend last Thursday. It remained so this week as the profit-booking seems to continue. On Tuesday, INR lost nearly half a per cent as it closed at 74.58 against the greenback.

Another key factors that contributed to the rupee weakness in the foreign flows. While the flows were building up in a healthy way, primarily due to inflows in equity segment, the foreign portfolio investors (FPIs) pulled out considerable amount of money.

According to the latest NSDL (National Securities Depository Limited) data, the net FPI investments so far this month is at $300 million. Comparatively, it was at $464 million a week back. Net flows have turned negative in equities segment i.e., the net outflow is at $132 million for January, as compared to a net inflow of $477 million a week. Therefore, there was a net outflow of $609 million over the past week. This is despite the equity markets doing well.


The rupee rally, which began in mid-December, faced its first major hurdle in the form of the resistance band of 73.90 – 73.75 last week. On the back of this, the local currency started to depreciate and has now fallen below the supports at 74.25 and 74.50. The nearest support from Tuesday’s close of 74.58 is at 75 with subsequent support at 75.25. On the other hand, the resistance levels can be seen at 74.50, 74.25 and 74.

The dollar index, which was moving within the price range of 95.75 and 96.90 since November last year, fell below the support at 95.75 last week. After marking a two-month low of 94.63 last Friday, the index has recovered and is now trading around 95.40. Nevertheless, it can trade with a bearish bias so long as it remains below 95.75. This can help INR in gaining ground against USD.


The close below the support 74.50 on Tuesday at 74.58 can continue to keep the rupee under pressure. Therefore, the downswing is likely to extend in the forthcoming sessions wherein the domestic currency might decline to 75.

From trading perspective, one can sell INR at current level and on a rise to 74.25 with stop-loss at 74. Exit when it falls to 75.

Published on January 18, 2022
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