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The rupee (INR) seems to have found good support at 71.24 against the dollar (USD) as that level has prevented the rupee from depreciating below it for second consecutive day. Against Tuesday’s close of 71.21, the local currency closed marginally higher at 71.19 yesterday. The one-year forward spread of the USDINR currency pair has slipped below 300 points, indicating softening demand for the dollar in the forward market. This might result in rupee strengthening.
If the local currency gains, 71 will be a strong hurdle on the upside. A break of this level could take the rupee to 70.7. On the other hand, if the support at 71.24 is taken out, the rupee might decline to 71.4, where the 50 per cent Fibonacci retracement of the previous uptrend coincides.
Dollar index
The dollar index is struggling to move past 97.7, though it continues to stay above the 50-day moving average. The index seems to be stuck within a tight range between 97.45 and 97.7. Unless it moves out of this range, the next leg of the trend will be unclear.
Trade strategy
Though the rupee has been weakening over the past one week, 71.24 has acted as a considerable support. However, on the upside, 71 is a strong resistance. Thus, the domestic currency seems to be treading between 71 and 71.24. Traders are advised to wait until either of these levels are taken out.
Supports: 71.24 and 71.4
Resistances: 71 and 70.7
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