Technical Analysis

Rupee likely to remain bullish today

Akhil Nallamuthu, BL Research Bureau | Updated on June 01, 2020 Published on June 01, 2020

The rupee (INR) ended last week with a gain of nearly half a per cent as it closed at 75.61 versus the preceding week’s close of 75.95 against the dollar (USD). Though it had been testing the critical resistance at 75.6, the rupee was unable to breach that level decisively.

But today, the rupee has gone past the important hurdle of 75.6. The Indian currency has opened at 75.34, higher by about 0.4 per cent compared to previous close. On the upside, the nearest resistance is at 75.15, above which 75 can act as a hindrance. But if the local currency declines, 75.4 can be a support. Below that level, 75.6 is a considerable support.

The Foreign Portfolio Investors (FPI) remained sellers in May as well following substantial selling in the March and April. Nevertheless, the amount of selling came down. As per the latest data by the National Securities Depository Limited (NSDL), the net outflow of FPIs stood at ₹7,356 crores (equity and debt combined). As long as FPIs remain sellers, the rupee can face downward pressure.

Foreign reserves:

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday showed that the foreign reserves went up between May 15 and May 22. As per the report, the total reserves increased by $3 billion i.e. it increased to $490 billion from $487 billion. Foreign Currency Assets (FCA), the largest component of the reserves, increased by about $3 billion to $451.7 billion from $448.7 billion. The value of gold holding was largely unchanged at $32.8 billion compared to the preceding week. Increase in the reserves gives more room for the RBI to stem volatility.

Dollar index:

The dollar index posted a loss of 1.5 per cent last week as it closed at 98.34 versus preceding week’s 99.86. Thus, it has closed in the red for two consecutive weeks, indicating a build-up of bearish momentum. While the index is now trading at 98.1, the nearest support is at 97.75 with subsequent support at 97.15. Dollar depreciation is a positive factor for the rupee.

Trade strategy:

The rupee has begun the day on the front foot and until it trades above 75.6, it can be bullish. So, for intraday, traders can buy rupee on declines with stop-loss at 75.6.

Supports: 75.4 and 75.6

Resistances: 75.15 and 75

Published on June 01, 2020
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