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The rupee recorded its all-time low of 72.40 against the dollar last Tuesday, with the slide seeming endless at that time. However, the currency staged a recovery from that juncture, gaining 1 per cent over the last four trading sessions, closing at 71.70 on Monday.
On Monday, the ruppe made an intra-day high of 71.50, moving close to the resistance band between 71.40 and 71.60. These levels have been stopping the rupee from appreciating further for the past three weeks, making it a significant hurdle.
Market sentiment
The rupee has outperformed all currencies of major economies, except the Japanese yen. However, the concern is that FPIs are net sellers as they net sold shares worth ₹3,444 crore in the past four trading sessions. Inflation numbers and industrial production data, scheduled to be released on Thursday, will be keenly watched.
But risk appetite across the globe seems to be improving as envoys from the US and China are reportedly meeting in early October to ponder over a potential trade deal.
The gain in the rupee is currently capped by a strong resistance area between the price range of 71.40 and 71.60. Those levels coincide with the 23 per cent Fibonacci retracement level of the previous downtrend, and thus, for the currency to make any significant progress, it needs to break above that resistance band. In the event of the rupee moving beyond 71.40, the rupee may appreciate towards 71, the next resistance level.
The dollar index moderated as the greenback witnessed some selling pressure over the past week, where it declined 1 per cent from 99.33, its recent high.
Technically, the higher highs formed by the dollar index were not corroborated by the Relative Strength Index, indicating some weakness in the bullish trend by way of negative divergence. Hence, in the near term, the index will more likely consolidate between 98, which is an important support, and 98.50, until the announcement of any significant news.
As we observed, the price band of 71.40 – 71.60 is a strong technical resistance, and on the downside, 72.40 is a considerable support. Since ease prevails now in the market, there is a high likelihood of the rupee, along with other emerging market currencies, remaining muted.
The Indian currency could consolidate between 71.40 and 72.40 in the short term.
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