Technical Analysis

Rupee consolidates within the uptrend

Gurumurthy K BL Research Bureau | Updated on March 25, 2019 Published on March 25, 2019

The support at 69.2 keeps the bullish outlook intact for a test of 68 in the short term

The rally in the Indian rupee, which has been in place for more than a month, halted last week.

The currency strengthened to 68.35 on Tuesday last week, and reversed lower from there. The rupee has been stuck in a sideways range between 68.35 and 69.2 since then. It closed at 68.94 on Monday, down 0.6 per cent for the week.

Fed holds rate

The US Federal Reserve left its policy rates unchanged in the 2.25-2.5 per cent range as expected last week. But the Fed surprised the market with its future rate hike projection. Earlier, in December, the Fed had projected the possibility of two rate hikes in 2019. But the projections in its latest meeting last week showed that it will continue to keep rates unchanged at the same level through this year. The Fed’s decision is a positive for Indian equities and rupee.

The outcome of the Fed meeting dragged the dollar index to a low of 95.75. However, the index has managed to recoup almost all the losses made last week, and is currently trading at 96.5.

The outlook for the index is mixed. The index has been range-bound between 95.75 and 97.7 over the last few weeks. It can continue to trade in this range for some more time.

 

 

The rupee can consolidate between 68.5 and 69.2 for some time. The price action in the past week indicates that the level of 69.2 is providing strong support for the currency. This leaves the bias positive, and the uptrend is likely to remain intact.

As long as the rupee trades above 69.2, there is high possibility of the currency breaking above 68.5 and strengthening further towards 68 against the dollar in the short term. A pull-back move from 68 can trigger an intermediate corrective fall to 68.35 and 68.5.

But a strong break above 68 will boost the momentum. In such a scenario, the rupee can extend its upmove towards the next target of 67.55.

As mentioned last week, 67.55 (61.8 per cent Fibonacci retracement level) is a crucial resistance for the rupee from a medium-term perspective.

The near-term view will turn negative for the rupee only if it breaks below 69.2 decisively. In such a scenario, the rupee can fall to 70. But a further fall below 70 looks unlikely for the currency at the moment.

As long as the rupee trades below 70, there is a likelihood of it strengthening towards 67.55 over the medium term.

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