CURRENCY CALL. Rupee stuck in sideways range

The rupee breached a key resistance level of 66 in early March and extended its upmove until late April.

However, it encountered a significant resistance at around 64 in late April, recording a peak of 63.93 on April 26. After a corrective decline, the rupee again tested the key resistance level of 64 in mid-May and fell sharply. But a key support at 65 arrested the rupee’s decline; a 50-day moving average at these levels provided further support.

After taking support at this base level, the contract is heading northwards. On Monday, the rupee marginally declined to close at 64.49 levels. Since early March, the rupee has been on a sideways consolidation phase in the range between 64 and 65.

Following a sharp fall in the second week of May, the dollar index found support at 96.7 last week and is in a corrective up move.

During this fall, the index breached its 200-day moving average as well as a key support at 98.7. The ongoing up move lacks strength.

The index currently trades at 97.3. It faces a key resistance ahead in the zone between 97.5 and 98. Strong rally beyond this hurdle could test next resistance at 98.7 levels.

Resistances beyond the level are placed at 99.4 and 100. If the dollar index breaches the immediate support level of 96.7, it can decline to 96. Such a fall will reinforce the intermediate-term downtrend that has been in place since encountering a key resistance at 103.5 in early January. The next key support for the index below 96 is pegged at 95.

The recent recovery in the rupee from the key support level of 65 is once again strengthening it and increases the possibility of testing the upper boundary of the sideways consolidation phase at 64 in the near term. Breach of the immediate resistance level of 64.3 can push the currency higher to 64 in the coming weeks.

An emphatic break beyond 64 can strengthen the uptrend and take the rupee higher to 63.73 initially and then to 63.46 in the short to medium term.

Inability to surpass 64 could keep the currency in the sideways band between 64 and 65 for a while.

On the other hand, the rupee has immediate support at 64.72. A slump below the level can drag it down to 64.95 and 65 in the near term. A strong plunge below 65 can pull the currency down to 65.4 and then to 65.8 in the short term.