Indian Rupee could advance further against U.S. dollar

The Indian Rupee has been on a climb since last Thursday against the U.S. dollar. On Tuesday, the domestic currency gained 0.4 percent to close at 78.72. Thus, the year ­to­ date loss of INR versus USD is now down to 5.9 percent. The gain was largely due to the weakness in the dollar over the past week. The U.S. treasury yields are also on a decline, weighing on the greenback

The rupee is on a rally of late, and by closing at 78.72 on Tuesday, it has closed just above the resistance of 78.80. If it can sustain above this resistance, there are good chances for INR to appreciate further to 78.25 and 78, the nearest notable resistances. On the downside, 78.80 will now act as a support. Upcoming support is at 79.10.

The dollar index (DXY) depreciated over the last week and is currently trading at 105.60 after testing the support at 105. The 50-­day moving average coincided at 105, making it strong support. Therefore, a bounce from the current level cannot be ruled. On the upside, it can rally to 107 in the coming week. But if 105 is breached, there could be a decline to 103.80.

Although the major trend is bearish, the rupee has moved above some important levels over the past week. This run to continue at least until Thursday when the Reserve Bank of India will announce its latest policies. There are chances for the rupee to touch 78.25 this week. But note that RBI policies can induce some volatility which can distort the current trend.

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