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The rupee inched up over the past week against the dollar. On Tuesday, the rupee appreciated by 0.2 per cent to close the session at 82.94.
Supporting the upside, the net FPI (Foreign Portfolio Investors) flows have been positive over the past week. According to the NSDL (National Securities and Depository Limited) data, the net inflows over the past week stood at about $1.3 billion.
- Also read: What is the outlook for dollar, rupee, euro and the US Treasury yield?
However, the broader trend seems to be weak for the domestic currency as the dollar has been on the front foot. Also, the US treasury yields have also been on the rise, supporting the bullish case of the greenback.
Technically too, the rupee appears weak and the likelihood of further decline is high.
- Also read: Rupee sinks to new low against dollar
Chart
Last week, the domestic currency declined below the 83-mark. This has confirmed a triangle pattern on the chart according to which the rupee is likely to fall to 85.50 over the medium-term.
Although the rupee has now moved above 83, there is a strong resistance at 82.80. Unless this level is breached, the bulls cannot turn the trend. As it stands, a break above 82.80 by the rupee is less likely.
- Also read: Rupee outperforms EM Asia peers even as it approaches record low
The up move over the past week is more of a corrective rise and we expect the rupee to resume the downtrend soon. In the short-term, it can depreciate to 84.
The dollar index (DXY) broke out of the resistance at 102.80 last week and is now hovering around 103.30. The price action is bullish and so, the chances for a rise towards an important resistance at 104.50 is high.
Outlook
Overall, despite the FPI inflows, the strength in dollar is weighing on the Indian currency. Going forward, the rupee is set to depreciate, possibly to 83.50 in a week and to 84 in a month or so.
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