INR-USD heading to consolidation
The 83.50 level is testing time for RBI; Indian rupee strengthened on Friday on weak US dollar index and a decline in crude oil prices; Positive tone in domestic markets also strengthened the rupee; However, FII outflows capped gains
Bullish Bias
♦ Dollar index posts gain for 2nd mth
♦ It surgest over 106.50 level
♦ Major currencies sell off as dolar trades in overbought zone
♦ Resistance at 83.40-83.45 level
♦ RBI vigilant on 83.50 level
♦Medium to long-term outlook is 84 mark
Indian currency was trading Rs1.42 or 1.73 per cent lower at 83.19/USD on Monday (October 2, 2023) from Rs81.77 on December 31, 2022. The home currency recorded its 12-month low of Rs80.50 (Nov 12, 2022) and all-time low of Rs83.30 (Sept 26) in the forex market, and now heading towards consolidation mode.
The dollar index, which gauges the Greenback’s strength against a basket of six currencies, surged above 106.50 for the first time this year, however, retreated immediately to 106 due to overbought condition. Greenback posted gain for a second consecutive month on improved investor confidence about US GDP growth as the world’s largest economy is poised to handle higher interest rates effectively when compared to other economies. In futures trading, 73.41 level will act a major resistance for USD-INR in forthcoming sessions.
“After reaching its record low level, USD-INR has been consolidating near that peak and encountering immediate support at 83 level. If dollar index undergoes a correction from its elevated level, given the overbought condition and the oversold state of other major currencies, this could assist USDINR in dropping below the 83 level,” Tapish Pandey, research analyst at SMC Global Securities Ltd, told Bizz Buzz.
The 14-period Relative Strength Index (RSI) is displaying a negative divergence on the chart. While USDINR prices have been making higher highs since mid-August 2023, during the same period, the RSI has remained relatively flat and even moved slightly downward, according to SMC Global Securities.
“This divergence suggests a disparity between price momentum and market strength, indicating that USDINR may consolidate or experience a correction in the upcoming sessions. At resistance levels, a significant barrier is anticipated around 83.40-83.45 zone,” adds Pandey.
“We also anticipate that RBI will not readily permit USDINR to breach 83.50 level. Furthermore, if USDINR does dip below 83 level, it may correct further, possibly toward the next support levels of 82.50-82.60. However, as discussed earlier, the overall trend remains bullish and in the medium to long run, we anticipate USDINR moving towards the 84 mark,” forecasts Pandey.
Therefore, any dips near the major support zone of 82.50-82.60 should be viewed as potential buying opportunities for medium to long-term investors.
On last Friday, the home currency rose 13 paise to 83.06 against Greenback due to the dollar weakening. The dollar index fell below 105.40 after reaching a high of 106.50 on Thursday. The bullish Indian stock market further supported the local unit.
Forex traders are looking to cues from India’s fiscal deficit data. Forex analysts forecast that USD/INR spot price may trade in a range of Rs82.70 to Rs83.40. The dollar index fell 0.52 per cent to 105.68. Brent crude, the global oil benchmark, was trading 0.90 per cent lower at 93.04 per barrel as against $95.72 on last Friday.
