The fight between bulls and bears continue and there is no winner yet. The Indian rupee continues to be range-bound against the dollar. On Tuesday, it closed at 77.64 against USD, losing 0.12 per cent. The year-to-date loss currently stands at nearly 4.5 per cent.

Fundamental factors, as they stand, look mixed for the Indian currency. The dollar is down whereas the price of crude oil stay elevated. On the other hand, foreign funds seem to be fleeing the domestic market.

Europe taking concrete steps towards banning Russian oil imports is providing an upward pressure on crude prices. The Brent crude future is currently trading above the $120-mark. According to the latest NSDL (National Securities Depository Limited) data, FPI (Foreign Portfolio Investors) net outflows in May stood at $4.7 billion, taking the total outflow for the year to $23.1 billion. Overall, the rupee is staying directionless and this trend is likely to continue. The charts too are indicating a similar sentiment, and the USD-INR cross is oscillating in a range.

Charts

The sideways crawl continues as the rupee is shackled in the range of 77.50-77.80. Technically, the local currency should breach either of these levels to confirm the next leg of trend. But since the long-term trend is negative and the dollar has already declined considerably, prolonged consolidation might prove negative for the rupee. If there is a breach of the support at 77.80, there might be a quick fall below 78 and touch 78.30. But in case it breaks out of 77.50, it can appreciate to 77.

The dollar index (DXY) is on a decline for the past couple of weeks. Currently trading at around 102, it is likely to drop to 101. Below this, 100 is a strong support; DXY can resume the bull run anywhere between 100 and 101. On the other hand, a breach of 100 can trigger another round of sell-offs, potentially pulling back the index to 99-99.25 range swiftly. Subsequent support is at 97.75.

Outlook

Unless INR moves out of the 77.50-77.80 range, the next leg of trend will remain uncertain. But it should be noted that the rupee has failed to make use of the recent depreciation in the dollar. Therefore, the probability of the local currency breaking the range on the downside will continue to go up as the consolidation continues, especially given that the greenback is approaching some support levels. A breach of 77.80 can quickly drag the rupee to 78.30.