Weekly Rupee View: Supports can limit the downside in INR

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The Indian Rupee managed to recover in the past week in line with our expectations.

The corrective rise to 82.60 took place as expected and rose beyond 82.60 to hit a high of 82.51 on Monday.

However, it fell on Tuesday, giving back the gains made during the week. It closed at 82.72 on Tuesday.

debt ceiling deal

All eyes will now be on US developments on the US debt ceiling deal, with a vote on the deal likely to take place by Wednesday.

Any stop or delay in passing the transaction would cause market volatility this week. It will increase risk aversion in the market, which in turn will have a positive effect on the dollar. Thus, this could keep the rupee weak all week.

Dollar forecast

The Dollar Index (104.10) has been struggling to get a strong follow-up rally over the past few days. Important supports are found at 104 and 103.80.

The index should maintain above 103.80 and get a strong rally to continue. This would be bullish for the dollar index to target 105 and even 106 in the short term.

If the Dollar Index breaks below 103.80, a corrective drop to 103.6 initially and then to 103 is likely. Overall, it’s a wait-and-see situation.

supporting factors

Rise in Indian stocks, strong foreign money inflows and lower crude oil prices are factors that could help limit the weakness of the rupee.

Indian markets saw net inflows of $5.12 billion in May. Stock markets look strong. Benchmarks could hit new highs in the coming weeks.

The price of Brent crude, at $76 per barrel, has been fluctuating between $74 and $79 since the beginning of this month. On the charts, there is a negative bias indicating a possible break below $74, which would lead to a decline towards $70 and even lower levels.

rupee forecast

The Indian Rupee enjoys important support in the region of 82.80-82.85. The resistance is at 82.50 which is holding well for now. If the rupee breaks below 82.85, it could drop to 83. However, a drop beyond 83 looks less likely so far.

On the other hand, the local currency has to breach 82.50 to consolidate more strength. A break above 82.50 could lift the rupee to 82.30-82.20 in the near term.

It would be best to see the rupee in the range of 82.50-82.85 for now. Finally, we can expect the rupee to break 82.50 and rise to 82.30-82.20.