Technical Analysis

Rupee might head towards 52-week low

Akhil Nallamuthu | Updated on November 14, 2019

BL Research Bureau

The 52-week low for the rupee is at 72.44. It is becoming increasingly difficult to reject the possibility of rupee (INR) testing this level as it continues to lose ground against the dollar (USD). In fact, the Indian currency has closed in the red consecutively for the past five trading sessions. By closing at 72.08 on Wednesday, the month-to-date loss of INR against USD is around 1.5 per cent, and the year-to-date loss is around 3.3 per cent.

A close below 72 indicates that the rupee could depreciate further to a crucial support band between 72.3 and 72.44. The support will most likely arrest the fall, at least for a short period , where one can also expect some profit booking resulting in rupee recouping some of its losses. In case if rupee recovers from the current level, 72 will act as a hurdle. Beyond the level, the resistance is at 71.6.

The Consumer Price Index (CPI) data released on Wednesday showed a considerable uptick in the inflation. The CPI for the month of October 2019 came in at a 16-month high at 4.62 per cent against 3.38 per cent for the same month previous year. The rate is also higher compared to September 2019 number of 3.99 per cent. The current level is well above the RBI targeted level, and this might trigger expectations that the central bank might not reduce the repo rate in the upcoming meeting. From the perspective of the currency market, a status quo by the RBI can work in favour of the rupee, as a higher interest rate is favourable for the domestic currency. But it may be too early to say that inflation is sustainable at this level and the RBI will act solely on this.

The dollar index is trading within the range between 98 and 98.25, but with a bullish bias. A breakout of 98.25 can lift the index to 98.5 weighings on the rupee. On the downside, 98 is strong support, and until the index trades above it, the dollar will be bullish.

In today’s session, the rupee has begun the session at 72.06 versus yesterday’s close of 72.08. Until it trades below 72, one can maintain bearish bias on the rupee. Be cautious, because the chances of profit booking increase as it treads towards the 52-week low. Hence, short positions must have a tight stop-loss.

Supports: 72.3 and 72.44

Resistances: 71.6 and 72

Published on November 14, 2019

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