Rupee remains flat at 81.88

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The rupee, closing at 81.88 against the dollar, was almost flat on Tuesday. Hence, it continues to stay within the key levels at 81.60 & 82.15, in line with our expectations. However, the Indian currency has been rising since March and the overall sentiment remains positive.

The gains were largely driven by foreign inflows. According to NSDL (National Securities Depository Ltd) data, net inflows of FPI (foreign portfolio investors) in March and April were $0.7 and $1.7 billion, respectively. The gains could have been better because the increase in foreign exchange reserves indicates that the RBI may have bought dollars, which could cap gains in the rupee.

However, this week the Fed is scheduled to announce its monetary policy on Wednesday. This could create the dollar-rupee for a new leg of the trend on both sides. The market, in general, is expecting a rate hike of 25 basis points. Any deviation from this can increase volatility in the dollar-rupee pair.

The charts are unable to indicate the direction as the local currency continues to consolidate.

Schedule

The rupee, at 81.88, is within the range of 81.60-82.15. As long as the rupee stays within this price range, the next part of the trend will be uncertain from the perspective of technicians. A break of 81.60 could lift the rupee to 81.10 quickly. But if there is a breach of the support level 82.15, we may see a drop to 82.50.

Dollar Index (DXY) which is trading in the range of 100.80-102.20, is now testing the upper band. If 102.20 is breached, the price may rise to 103.50, which is a resistance level. However, if DXY breaks below the resistance, it can find support at 101.20 and 100.80. A breach of 100.80 could turn the trend to the downside, which could be positive for the rupee.

prospects

According to the charts, the rupee may extend the sideways trend this week as well and stay within 81.60 and 82.15. However, the interest rate announcement from the Fed could establish a trend from the current level, which could be on either side. Therefore, participants need to be careful for now.