The rupee (INR) was stable on Tuesday and closed at 83.05 versus the dollar (USD). The local currency had closed at 83.11 last Tuesday. Although, INR has gained over the past week, it has been facing downward pressure in the last three sessions.
After marking a high of 82.82 on Friday, the rupee depreciated as the dollar rallied. Following better-then-expected non-farm payroll numbers released on Friday last week, the greenback rose sharply. Over the past week, the dollar index (DXY) moved up nearly 1 per cent and is now trading around 104.50
But broadly, the rupee managed to limit the downside despite the dollar gaining. Good foreign inflows and the recent drop in the crude oil prices provided a buffer for INR. Over the last week, net foreign inflows stood at $975 million and Brent crude oil prices fell 5 per cent since last Tuesday.
With the above developments aside, the chart of USDINR fails to indicate any trend. Below is an analysis.
The broad range of 82.75-83.50 in the rupee is still valid. The next leg of trend depends on the direction of the break of this range. Within this, INR has been oscillating within the 83-83.35 range.
Currently at 83.05, INR has its nearest support at 83.20 where a trendline coincides. Subsequent support is at 83.35. On the other hand, the immediate barrier is at 83 with the next one at 82.75.
The dollar index broke out of the resistance at 103.40 last week. So, now, the probability of an upswing to 105 has gone up. A breach of 105 will open the door for a rally to 106.50, a strong resistance. But if there is a fall, DXY can find support at 103.40 and 103.
In the upcoming sessions, the rupee might slowly slip to 83.20. Largely, we can expect INR to remain within the 83-83.20 price band in the near-term. But, note that if the rally in USD continues, the rupee might depreciate to 83.35.
Look out for the RBI policy announcement on Thursday, which could have an impact on the exchange rate of USD-INR pair.