We could expect the rupee to be in the range between 69.50 and 67.50. We could also looking at hedging against a stronger rupee as trends are showing signs of more strengthening.
Over the last few weeks, the rupee had consolidated at 69 and finally, the support was given away largely due to global cues that emanated from easing crude oil prices and a weaker greenback.
Post Budget implications could help further strengthen the resolve in the rupee to strengthen further. There was also some help offered by the other emerging market economies that displayed some recovery, thus adding to the bullish sentiment on the rupee.
Our view that the 69 levels shall be tested has been in line with the market movement. Now we need to wait for some clarity as the agenda of the reinstated BJP government shall be set forth, which shall enhance the traders and investors perspectives about how the rupee shall get influenced.
The Reserve Bank of India (RBI) introduced a rate cut for the third time in a row due to the slow economic growth and rising global uncertainty.
Now, with the Budget being released, we need to see how the combined effect shall help to attract the foreign flows into our economy. In the last few months, the forex reserves are seeing a sharp increase and reaching a record high at $426 billion.
Foreign exchange reserves are held by the RBI as a tool to maintain the stability of the currency and control inflation.
Moving to the charts, we observe that the weakness could not continue and post the election the rupee began to drift lower. Now, the prices too are reflecting a strengthening scenario as the durable support around 69 has been breached on the back of weaker dollar seen in the last few weeks.
The higher timeframe charts indicate the possibility of a further decline towards 67.50 as the large body negative candle has triggered some selling pressure.
Taking a look at the ADX DMI setup, we are observing that the congestion zone on weekly charts is clearly given way to more declines and could head lower if more positive cues begin to emerge.
Hence, for the coming few weeks one should be looking at the rupee to strengthen as the dollar will continue to be under pressure.
For the coming week, we could expect the rupee to be in the range between 69.50 and 67.50. We could also looking at hedging against a stronger rupee as trends are showing signs of more strengthening.
(The author is Head of Training, Chart Advise)Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.