The Hindu Business Line : Rupee futures to trend lower

Rupee strengthened to a 52-week high of 46.2 against the dollar last Friday causing a great deal of consternation among the exporting fraternity. But as the dollar stabilised, the rupee too halted its rally to decline to 46.6 on Monday. Tepid foreign institutional inflows contributed to the rupee weakness.

All eyes are riveted on the dollar index as the negative correlation between the greenback and other assets such as emerging market equity, commodities and other currencies is currently very strong. The dollar index is very precariously poised at the key support at 76. A decline below this level would take the index to 74.5 and 72.

One-month view

The rupee is halting just below the key psychological resistance at 46. There are two trajectories that the Indian currency can possibly take.

Since the currency has closed above the previous peak of 46.7, the preferred view is that the third leg of the up-move from 52.1 is currently unfolding. This leg has the targets of 45.6 and 43.6.

If the rupee does not violate the 46-mark and declines below 47, it would imply that the sideways move between 46 and 49 is prolonging.

Targets based on Fibonacci retracement levels are 45.5 and 44.1. Unless the steep appreciation continues in the near future, the rupee can halt this leg of the rally between 45 and 45.5.

Five-day view

Short-term trend in rupee continues to be up. The reversal from the recent peak at 46.2 lacks strength and the appreciation can continue to take the rupee to 46.2, 45.9 or 45.6 in the near-term.

NSE currency futures

October futures of USD-INR currency pair closed slightly higher at 46.4 on Monday. This uptrend is however likely to face resistance at 46.8 and 47.03. Traders can therefore go short in rallies with a stop at 47.1. Downward targets are 46.2 and 45.9.

Supports – 46.7, 46.9, 47.1

Resistances – 46.2, 45.9, 45.6

Lokeshwarri S.K.

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