The rupee dropped 0.1 per cent against dollar and closed at 83.16 on Tuesday. Over the past week, the local currency has remained largely stable.
The domestic unit stayed flat despite considerable sell-off by the foreign portfolio investors (FPI) as the dollar was charting a horizontal movement. The crude oil prices too did not change much on a weekly basis.
According to the NSDL (National Securities Depository Limited) data, the net FPI outflow over the past week stood at $1.7 billion. For January so far, the net outflow is at $345 million.
The chart shows that rupee is moving in a range after witnessing a fall early last week. Below is an analysis based on the charts.
Chart
The current trend in the foreign exchange market suggests a sustained stability. The rupee is currently hovering around its present level, with the closest support identified at 83.30. Any potential decline below this support may result in a further drop to 83.50. Conversely, if the rupee experiences a recovery, it could encounter resistance at 83 and 82.80.
A significant development would be a breakout below 82.80, which could initiate a rally towards 82.50 or even 82. However, considering the prevailing strength of the dollar, the likelihood of such a rally in the rupee appears diminished.
The Dollar Index (DXY) has been displaying a bullish inclination since breaking the barrier at 102.80 two weeks ago. There is a notable probability of the DXY advancing to 104.20 in the short term. Subsequently, a corrective move to 103.50 might occur. A breach beyond 104.20 has the potential to trigger an upward movement towards 105 or even 105.60.
Outlook
The rupee may maintain a flat trajectory against the dollar. But the prevailing positive bias in the dollar suggests potential downside risk for the rupee. Potentially, it could drop to 83.50 in the near-term.