Rupee Could Hit 80. How Should You Trade?

Jun 29, 2022

Brijesh Bhatia, Research analyst

The Indian rupee has been falling against the dollar. It recently hit an all-time low.

So how much more will the rupee fall against the dollar?

With the help of two charts, I'll answer this question in this video.

Watch the video and let me know your thoughts.

Hello viewers. Welcome to the Fast Profits Daily. Myself, Brijesh Bhatia.

In this video, I'll be discussing about the rupee against the dollar.

The rupee has been depreciating right from around 73-73.5 levels in 2021 now to the new all-time low of around 79 against the dollar.

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If you remember, in March 2021 when rupee was trending around 73-73.5 levels, I indicated that the dollar may hit the highs of around 80 against the rupee, and you can see the screen over here which is the video which I have shared on our Equitymaster's YouTube channel when it was trending around 73.5 levels.


Now we are approaching the target of around 80. We have already reached the levels of 79. So what are the charts indicating now and what should an importer or exporter look at the levels in the coming weeks and coming months?

 

Let's look at the first chart over here. This is a weekly chart of USDINR.

Now if you look at the structure, the black lines are where the previous highs have been taken out, which means that if you look at the structure, when the prices hit the new high, it consolidates in the form of a basing structure.

Now, if you look at his orange line over here on your screen, this is the basically the basing structure, which for the years have been developing once the price breaks out and hits the new high. It consolidates in a form of a basing structure.

Right now, on the extreme right of your chart, we saw during the pandemic low, it has hit a low of around 77.5, and since then, it formed the huge basing structure, hitting the low of somewhere around 73-73.5 or probably below the 73 levels, and now we are breaking out above those resistance levels, which was 73, 77, and 77.5.

Look at the basing structure. It took around two years, nearly two years, to form the base. Even if you look at the historical move in this structure, right from the left bottom, it took around 3.5-4 years of basing structure, and when the breakout happened, we saw a rally again.

Again the basing structure was there and I think this is the sixth time the basing structure has been forming on the dollar-rupee chart, which means that rupee could depreciate more.

So what are the levels one should look for in the recent momentum?

If you look at the broader picture, it seems that rupee is on the cards of more depreciation against the dollar or I would say, the dollar would strengthen against the rupee looking at the technical structure.

 

Looking at the daily chart over here, the orange line which is around 77-77.5 levels, it broke out, and we have seen a fast and furious move towards the higher levels.

Now, if you look at the black lines over here, basically this is known as rising wedge structure. Now basically the rising wedge structure is the bearish structure as per the technical analysis. But if you look at the arrow which has been marked, the prices have broken out above the structure now and basically, it has failed the bearish a wedge or the rising wedge.

Generally when the technical structure fails, it indicates that there could be a short covering rally or the longs unwind. In this case, we have seen prices heading higher.

So there is a possibility of short covering rally coming very fast and furious, which could take the rupee towards 81-82 levels against the dollar. So more dollar appreciation can be on the cards.

Looking at the short term moment, or looking at the quarter structure, I believe probably we might see around 81-82 level because a short covering rally can be on cards, looking at the derivatives structure as well.

So from three months to four months, one could look at around 81-82. But I believe we are heading to more lower levels into the rupee against dollar and I won't be surprised even if by end of 2022, we might see around 83-83.5 levels, and probably the next year, 2023, we might see around 86-87 levels on the dollar-rupee levels.

Signing off, Brijesh Bhatia.

Warm regards,

Brijesh Bhatia
Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)

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