The rupee (INR) depreciated 0.46 per cent on Tuesday as it ended at 83.53 versus dollar (USD). This is the biggest intraday fall since February 6, 2023. As the election results came in, the market spooked, leading to a substantial sell-off. Not just rupee, but the domestic equity benchmark, Nifty 50, too, slumped nearly 6 per cent.

Indicating the fear in the local market, India 10-year yield rose to 7.10 per cent compared with Monday’s close of 7 per cent.

Despite staying volatile in the last two trading sessions, the rupee remains with key levels and the chart does not lend us any clue about the direction of the next leg of trend.

Chart

The rupee appreciated above the resistance at 83 on Monday. However, after trading briefly above this, it changed direction and closed below this hurdle. Following this, there was a sharp fall on Tuesday and ended at 83.53.

That said, the rupee stays within the range of 83.00-83.60. If INR slips from here and breaks below the support at 83.60, it can quickly see a fall to 84. Note that 83.75 is a potential support.

On the other hand, if the local currency moves up from the current level, it will face resistance at 83. A breakout of this can lift INR to 82.80, a resistance. Subsequent resistance is at 82.50.

The dollar index (DXY) slipped below a trendline support early this week. Also, it has fallen below the 200-day moving average. So, there is a bearish bias at the moment which can lead to a possible decline to 103. In this case, INR can see a recovery.

But if DXY recovers from here and surpasses 105, it can bring back the bullish momentum. This can weigh on the Indian unit.

Outlook

In the near term, more than the movement in the dollar, the rupee’s direction can depend on domestic political developments. So, the volatility can be higher. That said, until INR stays within 83 and 83.60, the next leg of trend will remain uncertain.

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