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The Indian rupee (INR) burst through the blockades putting a strong performance against the US dollar (USD) over the past few sessions. It broke above a key resistances at 75.25 and 75 during the past week and the domestic currency marked a fresh one-month high of 74.61 on Tuesday.
It gained 0.44 per cent in Tuesday’s session and closed at 74.66. Therefore, year-to-date loss of INR versus USD has now dropped to 2.18 per cent.
The rupee has strengthened despite continuous selling by the FPIs (Foreign Portfolio Investors). The net outflow in December, according to latest NSDL (National Securities Depository Limited) data, stands at ₹28,723 crore, an increase from ₹24,652 crore a week back.
On the other hand, the crude oil price has been hardening too. Brent crude is up by about 12 per cent so far this month as it trades near $80 a barrel. The reason for rupee’s strong show is because of banks offloading dollars on the back of exports activity and corporate flows, according to reports. The volumes are low because of the holiday season resulting in bigger impact on the back of the afore-mentioned activities.
Charts
The rally in rupee, which began its uptrend after marking a low of 76.31 a couple of weeks back, seems to be intact. The breach of the resistances at 75.25 and 75 has strengthened the bulls and the positive bias will remain until INR stays above the support at 75.50. On the upside, the rupee, which closed at 74.66 on Tuesday, faces an immediate resistance at 74.60, which is considerably strong. Subsequent resistances are at 74.30 and 74.
The dollar index continues to trade in the range of 95.75 and 96.90. So long as this range holds true, the next leg of trend will remain uncertain. A breakout of 96.90 can turn the trend positive and can take the index to the resistance at 97.60 and 98.00. But a break below 95.75 can be bearish wherein the index could fall to the nearest support at 95 and possibly to 94.50.
Outlook
The rupee has remained strong for the past couple of weeks and going forward, it is likely to retain the positive inclination. Since 74.60 is a hurdle, the local currency might moderate towards the support band of 75 – 75.15. But eventually it could appreciate towards 74.30 and possibly to 74 in the coming weeks.
Since the volumes are low because of holiday season, there could be higher volatility during the coming week. Therefore, traders are advised to stay away from trading.
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