Weekly Rupee View: Rupee lies within a range despite appreciating versus dollar

The rupee , which closed at 83.31 on Tuesday, gained ground against the dollar (USD) over the past week. This was largely due to a decline in the dollar which was triggered by a drop in the US consumer inflation data for April. This stoked rate cut debate and that weighed on the greenback.

The Indian currency was further supported by considerable foreign inflows towards the end of the last week. As per the NSDL data, the net FPI inflows in the last two sessions amounted to nearly $640 million.

Softer crude oil prices are also acting as a buffer for the local unit because of its inverse relationship.

Fundamental factors aside, the chart shows that despite the appreciation over the last few sessions, rupee remained within a range. Below is an analysis.

Chart

In the past one month, the rupee has been oscillating in the range of 83.25-83.60. Even as it rallied in the recent sessions, it could not move out of this band.

Currently trading at 83.31, if it gets past the barrier at 83.25, the short-term outlook can turn bullish, where it can rise to 83, a resistance. Above this level, the next resistance is at 82.80.

On the other hand, if the rupee falls off the top of range, it can find support at 83.45. Below this is the range bottom at 83.60, which can possibly arrest the decline.

The dollar index (DXY) slipped below the support at 105 last week. It is now trading at around 104.50. Note that DXY has fallen below its 50-day moving average, a bearish sign. But there is a support at 104.20, where a trendline also coincides. Essentially, the next leg of trend in the dollar index depends on whether it will breach the support at 104.20 or the resistance at 105 first.

Outlook

The rupee is held within a range and the next swing in dollar also remains uncertain. Going by the charts, we can expect the rupee to inch down, but stay within 83.25 and 83.60.