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After beginning the week on a weak note last week, the rupee (INR) recovered and marked an intraweek high of 81.08 on Friday before closing the week at 81.1250 against the dollar (USD). On Monday the domestic currency strengthened to 80.88 but then had reversed sharply lower. It has closed at 81.72 on Tuesday, posting a daily loss of 0.32 per cent.
The last week’s gain was largely because of positive foreign flows. As per the NSDL (National Securities Depository Limited) data, the net FPI (Foreign Portfolio Investors) inflows over the past week stands at nearly $462 million. That said, the weakness in the past couple of sessions could be due to the possible intervention by the Reserve Bank of India (RBI).
The charts show that the rupee has a support ahead which can arrest the fall. Here’s an analysis based on the charts.
Chart
The rupee, which rose last week, marked a high of 80.88 on Monday. But, thereafter it has depreciated sharply from that level. It closed at 81.72 on Tuesday. But since the price band of 81.85-82 is a support, the local currency might stop its decline at these levels. Similarly, on the upside, there is a resistance at 81. This opens the door for a consolidation within 81 and 82 in the near-term. So, going ahead, the direction of the breach of the range 81-82 can give us a clue about the next leg of trend.
For nearly two weeks, the dollar index (DXY) has been moving in the tight range of 101.8 – 102.5. Although there is a lack of trend, given that there is a strong support at 101.4, the odds are expected to shift in favour of a rally from here. If DXY goes beyond 102.5, it may face resistance at 105. A breach of 105 can turn the short-term outlook positive for the dollar. That in turn will be negative for the Indian rupee . However, as it stands, DXY is broadly flat.
Outlook
Given the prevailing conditions, the rupee is expected to stay in the range of 81 – 82 in the coming week. In case the dollar picks up momentum leading to the breach of the support at 82 on the rupee, we might witness INR depreciating to 82.50.
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