The rupee’s drop below 68 is causing jitters in the currency market. From a high of 67.71 on Monday, the currency has reversed sharply lower, breaking below the psychological level of 68. The currency had closed at the day’s low of 68.24 on Wednesday.
The strong break below 68 has cleared the way for the rupee to revisit the previous low of 68.86. Additionally, if the rupee continues to trade below 68, the possibility of it falling to new lows cannot be ruled out as we head into the new year.
A strong break above this hurdle can trigger a fresh rally in the index to 105.45. It will also keep the medium-term bullish outlook intact for targets of 106 and 107. Such a strong rally in the dollar index may drag the Indian rupee to fresh lows, going forward.
The sharp reversal from 67.71 in the past week has turned the short-term outlook negative for the currency. Immediate resistance is at 68.
A break above it may give some relief to the rupee and take it higher to 67.8 or 67.7 in the near term.
Support is at 68.35, which is likely to be tested in the near term if the rupee continues to trade below 68. A break below 68.35 can drag the rupee lower to 68.80 and 68.85 in the short term. Inability to break above 68.85 can trigger a bounce back move to 68.50 and 68.35.
On the other hand, if the rupee decisively breaks below 68.85, it can fall to 69 immediately.
Such a break will bring back the broader medium-term bearish view into the picture.
A subsequent break below 69 will see the rupee tumbling to 69.6 and 70.25 over the medium term.