The rupee recorded a low of 51.5 against the dollar on Monday before reversing higher. Volatility in the stock market and demand for dollars from oil importers kept the Indian currency under leash over the past week. Foreign institutional investors have net bought $269 million in equity over the week. Their net purchases for the year have exceeded $9 billion so far.
The dollar was weak on expectation that the Federal Reserve could soon start another round of quantitative easing. The dollar index is attempting to reverse from the support at 78.3. The medium-term view for this index will however turn positive only on move beyond 82.6.
Dollar-rupee outlook
The rupee is attempting to strengthen from the support at 51.5. The dollar-rupee pair has retraced half the losses made since the December trough at 54.3. The currency can now strengthen to 50.4, 50 or 49.7 in the days ahead.
Halt below the first resistance will maintain a negative short-term view while the currency needs to move above 49.7 to denote that the near-term view has turned positive. Medium-term supports for the currency will continue to be at 51.5 and 52.1.
USD-INR futures : This contract reversed down on Tuesday. Immediate support for the contract is at 50.5. Traders can initiate fresh long positions if the contract bounces off this level.
Fresh longs should be avoided on decline below 50.5 since next supports are at 50.2 and 49.9.
Short-term resistances for the contract are at 51.5, 51.7 and 51.95.
EUR-INR futures : These are weakening after retracing 61.8 per cent of the decline from the November 2011 peak. It is possible that the contract now declines to 66.6 in the weeks ahead. Traders can initiate shorts with stop at 68.5. Short-term targets are 67.1, 66.8 and 66.4.
GBP-INR futures : This contract is also reversing from critical medium-term resistance level. Traders can sell on rallies with stop at 81.8. Short-term targets would be 80.2, 79.8 and 79.4. Resistances for the contract will be at 81.7 and 82.
JPY-INR futures : This contract is constantly sliding since the peak of 69.8 formed on January 3. It is currently attempting to stabilise around the 50 per cent retracement level. Traders with a greater penchant for risk can buy in declines with stop at 60. Short-term targets for the contract are 63.2 and 63.6.