Higher crude oil prices likely to affect rupee negatively!

Although rupee is trading with a positive bias on March 3, 2022, higher crude oil prices and outflows of foreign funds are likely to affect the rupee negatively. Read on to find out more.

The spot USD/INR pair closed with 0.5% gains at 75.71 on Wednesday. This was amid surging crude oil prices and weaker performance by the Indian stock market. It would have further gained more if the Reserve Bank of India (RBI) might have not arbitrated aggressively in USD/INR. The trade deficit of India for February 2022 stood at 21.19 billion dollars against 13.12 billion dollars last year. The imports and exports stood at 55.01 billion dollars and 33.8 billion dollars, respectively.

Reversing gains earlier in the day, the dollar fell. This was due to the rise in US stocks post Federal Reserve Chair Jerome Powell said that he will be cautious while eliminating stimulus and also said that the economy can survive tighter monetary policy. Furthermore, ahead of Russia-Ukraine talks scheduled on Thursday, the EUR/USD pair reversed losses due to short-covering.

On March 1, 2022, the USD/INR pair achieved the target of its inverted head and shoulder chart pattern formed on lower time frame. The March futures of the pair formed the Doji candlestick pattern above the Bollinger Band’s upper band. This suggests that bulls have exhausted. But to witness a reversal, the price needs to close below 75.77 levels. In the near term, its support and resistance is placed at 75.41 and 76.11, respectively.

The Relative Strength Index (RSI) is around 64.54 and is heading north signifying bullish momentum. With a rise in volume and open interest, the derivative price actions are pointing towards a fresh long position. The trading range the investors need to watch out for the USD/INR pair is 75.40 to 76.10, but if the price falls below 75.77, we might witness long unwinding.

Also read: What Aswath Damodaran thinks about IPOs and role of the Central Bank?