The rupee could not get past the strong hurdle at 44 and reversed lower from the peak of 44.1 recorded on October 7. Choppy movement in the stock market and demand for dollar from importers prevented the currency from appreciating further while continued FII inflows lent strength to the currency. Weak industrial production numbers and spike in dollar pulled the Indian currency down to 44.6 on Tuesday.
Dollar strengthened against the euro and other currencies on short-covering ahead of the FOMC meeting minutes on Tuesday. The dollar index is attempting a feeble recovery from the support around 77. Breach of this level will signal that the index can decline to the November 2009 low of 74. Medium-term resistance for the index is at 79.5.
Dollar-rupee outlook
The rupee is once again reversing lower from the key resistance at 44. As explained earlier, this is the 61.8 per cent retracement (a key Fibonacci number) of the down-move from January 2008 to March 2009. Strong move above can take the currency to 42.5 or even the January 2008 peak of 38. The Reserve Bank is also likely to intervene at this level to prevent the currency from appreciating above 44.
Immediate targets for the currency are at 45.5 and 46.3. The medium-term view for the currency will stay positive as long as it trades above 47.2
USD-INR futures
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