Technical Analysis

Weekly rupee view: Further gains likely as dollar remains weak

Akhil Nallamuthu BL Research Bureau | Updated on May 05, 2021

It could appreciate to 73.40 over the next week

The rupee (INR) extended its gain against the dollar (USD) over the past week and it is currently trading around 73.84, the year-to-date loss is down to 1 per cent from 1.4 per cent a week ago. The dollar continues to be weak despite a recovery last Friday and this is helping the domestic currency to maintain a positive bias.

FPI bearish

The data by the National Securities Depository Limited (NSDL) shows that the foreign portfolio investors (FPI) continue to pull out money from the domestic market. The total net outflow across all segments in April stood at ₹8,836 crore. This looks to be continuing as the net outflow in May has already reached ₹5,688 crore. The equity segment seems to be the most hit as the outflow stands at 4,821 crore whereas debt has seen an outflow of ₹867 crore. This has been acting as a drag on the rupee and since the volatility in the financial market seems to be higher, FPIs may not become bullish soon. Further outflows can weigh on the Indian currency.

Technical

Appreciating over the past week, the local currency has rallied past the resistance at 74 and this clearly gives a bullish inclination technically. Also, it has gone past the 50 per cent retracement level of the prior downtrend which lies at 73.92. The near-term trend can be bullish until INR remains above 74 and so, further gain by the Indian rupee is very likely.

Supporting this, the dollar index seems to stay below the key resistance at 91.40. It has been witnessing a steady fall since the beginning of April, wherein it depreciated from about 93.40 to make a low of 90.40 last week. Though it bounced off from this level, it could not extend the gain beyond 91.40 and this up-move will most likely be a corrective rally before bears drag the index further. Hence, the ground is favourable for the Indian currency.

Outlook

Though the FPIs have been selling, which weighs on the rupee, the local currency could stay positive because of the weakness in the dollar. This trend will most probably continue over the next week and it could appreciate to 73.40 over the next week. Notably, the price band between 74 and 74.20 is key and a breach of this level can alter the trend.

Published on May 05, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.