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Over the past week, the rupee has made some gains against the dollar. On Tuesday, it closed at 76.18, up from 76.61 a week ago. Even on Tuesday, after opening significantly lower at 76.42 versus Monday’s close of 76.12, the local currency pared most of its losses in intraday trading, following the positive trend in the equity market. INR has been one of the best performing Asian currency in the last week. The year-to-date now stands at about 2.5 per cent.
FPIs (Foreign Portfolio Investors) continued to take money out of the country. The net selling in March stands at $6.35 billion according to the latest NSDL (National Securities Depository Limited) data. Therefore, YTD, net selling has increased to $15.2 billion. However, the pace of sell-off has come down and now that equity markets are showing some signs of recovery, it might soon come to an end.
Charts
The rupee, which rallied last week, marked a two-week high of 75.77 last Friday before sliding to current levels. Although the overall trend is bearish, the down trend seems to be losing traction and the currency might stay on a sideways trend, at least in the short-term. That is, it might start oscillating between the support at 76.75 and the resistance at 75.75. A break of either of these level can hint at the next leg of trend. Support below 76.75 is at 77 whereas resistance above 75.75 is at 75.50.
The dollar index (DXY), whose major trend stays positive, is now showing signs of a flat trend. In the short run, it could continue to move within the range of 97.70 and 99.40. This will also influence the Indian currency in staying flat. A breakout of 99.40 can lift DXY to 100 quickly whereas a breach of 97.70 can drag it towards the support band of 97.25 – 97.00.
Outlook
While uncertainties pertaining to geo-politics remain, the rupee managed to stay steady in the past week. Reduction in the pace of FPI selling and equity market making a recovery is turning the tide in the rupee’s favour. However, it might not rally sharply as the charts indicate the possibility of a sideways crawl within 75.75 and 76.75. So, until a breach of either of these levels occur, traders of USD-INR pair can adopt range trading strategy. Our last week’s recommendation of selling the rupee would have hit the stop-loss.
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