Technical Analysis

Tread with caution

Akhil Nallamuthu BL Research Bureau | Updated on July 13, 2020 Published on July 13, 2020

The rupee (INR) depreciated by three-fourth of a per cent last week against the dollar (USD). As a result, it has closed below the support of 75, increasing the possibility of further weakening.

The domestic currency, has opened today at 75.15 versus last week’s close of 75.2. If the rupee can advance from current levels, it will face a strong hindrance at 75. A break out of this level can result in a sharp rally. Resistance above 75 are at 74.8 and 74.6. On the other hand, if the local currency depreciates, 75.3 can be a support. Subsequent support is at 75.4.

The data from the National Securities Depository Limited (NSDL) shows that the Foreign Portfolio Investors (FPI) remain sellers so far this month after pumping in net investment of ₹26,000 crore in June (equity and debt combined). The net outflow for the current month stand at nearly ₹2,900 crore. The domestic currency, which is below the important level of 75, might face further downward pressure if the FPIs continue to sell.

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday showed that the foreign reserves increased in the period between June 26 and July 3, registering an all-time high of $513.2 billion. As per the latest report, the total reserves went up by $6.4 billion i.e. it increased to $513.2 billion from $506.8 billion. Foreign Currency Assets (FCA), the largest component of the reserves, was up by $5.6 billion to $473.2 billion from $467.6 billion a week ago. The value of gold holding increased by nearly half-a-billion dollar to $34 billion. Continuous growth in the reserves indicate a significant inflow of foreign money, which is good for the Indian currency.

Dollar index

Extending the decline last week, the dollar index slipped below the support level of 97. Thus, it has closed in the red for three continuous weeks, indicating a considerable downward momentum. Currently hovering around 96.4, the immediate support is at 96.25. Below that level, the support is at 96. A drop in the index can positively influence the rupee.

Trade strategy

The dollar index is indicating a sluggish demand for the greenback and the rupee is trading below the important level of 75, showing that both the currencies exhibit bearish bias. This could lead to the currency pair trading within a range for the day. Exercise caution.

Supports: 75.3 and 75.4

Resistances: 75 and 74.8

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Published on July 13, 2020
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