The global currency market, reacting to the Brexit verdict, tumbled on Friday.
The risky assets went for a toss even as the US dollar gained sheen. However, most currencies are recouping from their intra-day losses.
Let’s take a look at what the charts say about where the currencies are headed.
A crucial resistance between 96.8 and 97, which is holding right now, has to be broken for the dollar index to move above 98. Such a rise will also increase the possibility of a revisit of the 100 levels. Strong support is at 93, which, if broken, can take the index lower to 92 and 91.
The Japanese yen has a crucial resistance at 100, which, if broken, can take it higher to 97 or even 95 against the dollar. The yen will lose strength only if it breaks below the 106-107 support zone.
Rupee declines The rupee declined below an important support at 67.5 against the dollar and is hovering above 68. An immediate test of 68.3 is possible and a revisit of the previous low of 68.85 is likely in the short term. Also, going forward, there is a big danger of the rupee falling to a fresh low of 70 against the greenback.
The rupee looks much weaker against the Japanese yen as well. It is trading around 65.8 per 100 yen.
The broader downtrend remains intact. The rupee can weaken to 70 or even 72 against the yen. Immediate resistance for the rupee is at 64 and then strong resistances are at 62 and 60.
The rupee has strong resistances against the euro and the British pound at 74 and 90 respectively. These supports were tested on Friday and are holding very well. The rupee can remain range-bound between 90 and 100 against the pound if 90 holds. It can strengthen to 87 or 85 only if it breaks 90 against the pound.
Inability to break the resistance at 74 against the euro can take it lower to 77.5 in the near term. A strong break below 77.5 can take the rupee further lower to 80. On the other hand, if the rupee manages to break above 74, it can test 73. A further break above 73 will open doors for a test of 70 on the upside.
Pound plunges Clearly, the British pound took the worst hit, tanking 10 per cent against the dollar to record a 30-year low of 1.3220. Intraday, the currency recovered to trade near 1.3650. If it manages to sustain above the immediate support at 1.35, a range bound-move between 1.35 and 1.40 can be seen in the near term.
However, the overall outlook remains bearish. A decisive weekly close below 1.35 can drag it to 1.30, which is a strong long-term support. At the moment, the downside in pound is expected to be limited to 1.30 and a reversal from there can take it back to 1.35 or even 1.40 thereafter.
Euro falls The euro fell 4 per cent to make an intraday low of 1.09. Broadly, it has been range-bound between 1.05 and 1.15 since February 2015. Within this range, there is a strong possibility of a fall to 1.05 — the lower end of the range — in the coming months.