The rupee (INR) fell marginally versus the dollar (USD) over the past week as it ended Tuesday’s session at 83.52 compared with 83.44 a week ago. The local currency was down despite the dollar softening in the recent sessions.
The capital outflow weighed on the Indian unit. According to NSDL (National Securities Depository Limited) data, the net FPI (Foreign Portfolio Investors) outflows for May are $375 million.
While the dollar’s depreciation limited the domestic currency’s downside, a decline in crude oil prices since April also supported the rupee. Brent crude oil prices have lost slightly over 8 per cent over the past one month.
Another positive factor for the rupee is the strong domestic fundamentals. The services PMI (Purchasing Managers’ Index) and Manufacturing PMI for April stood at 60.8 and 58.8 respectively. Although it was less than expected, a number above 50 means expansion.
On the technical front, the chart of USDINR shows that the currency pair continues to be shackled within a range.
Chart
Since the final week of March, the rupee has been oscillating within the 83.25-83.60 range. INR can establish the next leg of the trend only if it moves out of this range.
If the domestic currency appreciates and surpasses the barrier at 83.25, it can move up to 83 or to 82.80, which are the next notable resistance levels.
On the other hand, if the rupee breaks below the important base at 83.60, it can decline to 84, a potential support. Subsequent support is at 84.50.
The dollar index (DXY) slipped below the support at 105.50 last week and marked a low of 104.52 before recovering to 105.20. Henceforth, 105.50 will act as a resistance.
Subsequent resistance is at 106.40. Note that 104.50 is support. So, there is a chance for DXY to trade between 104.50 and 105.50 in the near term. This will also keep the rupee in a price band.
Outlook
The rupee continues to remain in the range of 83.25-83.60. The chart of INR and DXY shows a potential flat trend ahead.