Technical Analysis

Weekly Rupee view: INR might weaken to 75.25

Akhil Nallamuthu BL Research Bureau | Updated on October 27, 2021

FILE PHOTO   -  REUTERS

INR was able to maintain a bullish bias over the past week despite foreign outflows and the crude oil remaining at elevated levels

The rupee (INR) appreciated against the dollar (USD) and marked a two-week high of 74.67 last Friday. On the other hand, the dollar has been largely flat for nearly one month and thus, the year-to-date loss of the domestic currency has come down to 2.6 from 3.1 per cent a week ago.

INR was able to maintain a bullish bias over the past week despite foreign outflows and the crude oil remaining at elevated levels. But going forward, the rupee might find it difficult to gain ground against USD.

The US Treasury Currency Report (semi-annual), which was expected to be released last week, is likely to be released only this week and a close watch is necessary as the US has placed India under ‘Monitoring List’ with respect to currency practices. If there is any change in status quo in the new release, it can impact the exchange rate to USDINR.

FPI Inflows

The fund flows of the foreign portfolio investors (FPI) was not favourable to the local currency last week. According to the data of National Securities Depository (NSDL), FPIs made considerable selling (₹8,719 crore) in equities over the past week and thus, the net outflows in October in equities stand at ₹7,014 crore.

Also read: Rupee inches 5 paise higher to 75.03 against USD

But the debt segment (including Voluntary Retention Route) saw net inflows of ₹2,854 crore over the past week and so, the net investments in October now stands at ₹789 crore. In the upcoming sessions, if the equity markets recover, it can attract FPI money which can help the rupee in firming up against the dollar. Otherwise, INR can come under further pressure.

Charts

The latest rally took the rupee above the key level of 75 last week resulting in it marking a fresh two-week high of 74.67. However, the domestic unit was not able to hold on to the gains where it saw a moderation and is now hovering around the important level of 75. Despite the rally, the trend retains the bearish bias and strengthening of rupee from the current levels is less likely.

Also read: Rupee slips 14 paise to 75.04 against USD in early trade

In the short-term, INR is likely to stay within in the band of 74.85 and 75.55 and trade with a bearish bias. In the forthcoming sessions, it will most likely depreciate gradually to 75.25, which can be minor support. A slip below this level will drag INR to the support band of 75.60 and 75.70. A decisive breach of 75.70 can drag it to 76. On the upside, 74.85 and 74.65 will act as a strong hurdle.

Outlook

Although the rupee witnessed a rally last week it may not be able to extend the rally from the current level of 75, a key level. While it is likely to stay within the range of 74.65 and 75.70 and the next leg of trend will remain uncertain until either of these levels are breached. Yet, during the coming week, INR is likely to trade with a bearish bias and gradually weaken to 75.25 and possibly to 75.60.

Published on October 27, 2021

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