The rupee marginally appreciated to end at 82.97 versus the US dollar on Tuesday. The domestic currency has been wavering in a narrow range of 82.90 and 83.10 for about three weeks. Thus, the broader range of 82.75-83.50, within which the USDINR currency pair has been oscillating for nearly six months, remains valid.

The local currency has been flat over the last week, despite a good amount of foreign inflows. According to NSDL data, the net inflows over the past week stood at about $930 million. In February, the net inflows so far were $2.36 billion. The recent rally in crude oil prices could be one factor that weighed on INR.

Below is an analysis of the charts.

Chart

The price action of the rupee is flat, and there is no indication of any trend. Ideally, one would assume the sideways crawl to continue given the flatness the chart indicates. That said, the chart of the dollar index (DXY) hints at some correction in the dollar.

Currently trading at around 104.20, the dollar index is likely to see a dip to 103, a support, in the near term. If this level is breached, DXY could fall to 101.30. Such a fall can help the rupee move up and test the resistance at 82.75.

As it stands, the chances of the rupee moving to 82.75-82.80 are high. If there is a sharp fall in the greenback, the rupee could surpass the barrier at 82.75, and this can open the door for the rally to extend to 82.50 and possibly to 82.20. But this largely depends on how the dollar moves.

In case the dollar regains traction and resumes the uptrend, we can see the rupee drifting towards 83.20 and to 83.45.

Outlook

At this juncture, the chart shows that the dollar is likely to soften, which could result in the rupee gaining. However, the magnitude of this depends on how quickly the dollar moves. A sharp fall in the dollar could even take the rupee to 82.50 soon. That said, some of the market participants believe that the RBI could buy dollars if it falls, and this might stem a rally in INR.

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