The rupee has been moving in a downward trajectory over the past fortnight. Demand for dollar from importers and FIIs pulling out funds from the equity market affected the sentiment adversely. Strength in dollar was another reason that contributed to rupee weakness.
The euro has been weakening against the dollar as the question-mark over Greek debt persists. This helped in sending the dollar higher. The dollar index moved higher over the past week but it is still trading just below the short-term trend-decider at 76.2. Near-term view will remain under a cloud as long as the index trades below this level. Conversely, a move above will take it to 77.2 and 78.3.
Dollar-Rupee outlook
The dollar-rupee pair moved largely in line with our expectation over the past fortnight. It did not rally beyond 44.5 and, instead, reversed to our outermost support. Near-term outlook will deteriorate only on a close below 45.1. Such a move will pave the way for the rupee declining further to 45.23 or 45.4 over the ensuing sessions.
It is however more likely that the currency now appreciates towards 44.8 or 44.57 again. The resistance at 44.5 will however be difficult to surpass just yet and the rupee could spend few more weeks in the range between 44.5 and 45.5.
Key medium-term support is however at 46.3 and the medium-term view remains positive as long as this level remains un-violated. The long-term trend in the rupee is up since March 2009.
USD-INR futures
USD-INR futures followed our script by bouncing off 44.74 to record the peak of 45.15 on Monday. The contract faces strong resistance at 45.19 in the immediate future and fresh longs are advised only on a close above this level. If it manages to do so, next targets are 45.29 and 45.45.
Supports for the upcoming sessions will be at 44.9 and 44.77. Fresh shorts can be initiated only on a close below the first support.
EUR-INR futures
EUR-INR futures reversed lower from the recent peak of 66. This contract is in a medium-term uptrend since June last year. But if we consider the chart of its underlying, there is a strong long-term resistance at current levels since it occurs at 61.8 per cent retracement of the decline from September 2009 to June 2010.
The contract could therefore find it difficult to move beyond 67 just yet and spend few more weeks vacillating in the range between 62.6 and 67. The medium-term trend for this contract will become obvious only once it breaks past either of these boundaries.
GBP-INR futures
The short-term downtrend that began from 74.7 continues to be in force and traders can hold their shorts with stop at 72.3. Subsequent targets are 71.5 and 71.2.
JPY-INR futures
JPY-INR futures remained in a sideways range over the past two weeks but this range has now expanded to 55.5 to 56.3. Traders would however do well to wait for the futures to begin trending in either direction before initiating positions in this contract.