Technical Analysis

Rupee retains positive bias

Akhil Nallamuthu BL Research Bureau | Updated on July 06, 2020

The rupee (INR) closed last week with a gain of about 1.3 per cent against the dollar (USD). It ended the week at 74.64 versus the previous close of 75.64, thus closing above the important level of 75. The price action in the daily chart is hinting at a strong uptrend in the rupee.

INR, opening higher at 74.5 on Monday, has moderated a bit as this level is a resistance. Nevertheless, 74.65 is a support and until the currency remains above that level, it can be bullish biased. Below 74.65, the price area between 74.9 and 75 can be a support band. On the other hand, if the rupee appreciates and rally past 74.5, it could face hurdle at 74.35.

Foreign Portfolio Investors (FPI) were net sellers last week; however, June has been positive for the Indian market as FPI net inflow stood at about ₹26,000 crore (equity and debt) for the month. Continuing with the positive sentiment, if they pump in more money in the current month, the rupee can gain further versus the greenback.

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday showed that foreign reserves increased in the period between June 19 and June 26. According to the latest report, the total reserves went up by nearly $1.3 billion – it increased to $506.8 billion from $505.5 billion. Foreign Currency Assets (FCA), the largest component of the reserves, was up by $0.6 billion to $467.6 billion. The value of gold holding increased by $0.7 billion to $33.5 billion compared to the preceding week. High holding of reserves is good for the currency as it can be an effective tool in keeping the exchange rate stable.

Dollar index

The dollar index closed marginally lower last week at 97.17 versus its previous close of 97.43. It continues to stay below the critical resistance of 97.75 and is currently testing the support at 97. A decisive break below this level can result in considerable sell-off. Such a decline could help the rupee gain ground against the dollar.

Trade strategy

The rupee has a considerable support at 74.65. Until it stays above this level, bulls have good chance to recover. Hence, for intraday, traders can go long in rupee with stop-loss at 74.8.

Supports: 74.65 and 74.9

Resistances: 74.5 and 74.35

Published on July 06, 2020

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